Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

CONTINGENCIES FUND ACCOUNTS 1996–97

Ordered,
Accounts of the Contingencies Fund, 1996–97, showing:—

(1) The receipts and payments in connection with the Fund in the year ended the 31st day of March 1997.
(2) The distribution of the capital of the Fund at the commencement and close of the year, with the Report of the Comptroller and Auditor General thereon.—[Mr. Betts.]

Oral Answers to Questions — TRADE AND INDUSTRY

The President of the Board of Trade was asked—

Bread Pricing

Mr. Gordon Prentice: What representations she has received from independent bakers on supermarkets selling bread below cost price. [40953]

The Minister for Competition and Consumer Affairs (Mr. Nigel Griffiths): I have received representations from my hon. Friend on behalf of W. H. Oddie Ltd., and from him and others on behalf of the National Association of Master Bakers, complaining about predatory pricing of bread.

Mr. Prentice: On Monday this week, I was in Blackpool speaking to the annual conference of craft bakers, of whom there are about 8,000 across the country. They are very concerned that supermarkets are selling bread as a loss leader, for less than the cost for which the small craft baker can bake it. Given the importance we attach to preserving vibrant town centres and our desire to keep bakeries in our high streets, will my hon. Friend give an assurance that the Competition Bill, which we debated on Monday, will be effective in outlawing that sort of predatory pricing?

Mr. Griffiths: The new Competition Bill introduces tough provision against the abuse of dominance in the market, including predatory pricing. In future, selling products at below the average variable cost of production will be presumed to be predatory, without anti-competitive intent having to be proven.

Mr. Michael Fabricant: It is good to hear that the hon. Member for Pendle (Mr. Prentice) has gone to Blackpool, given that the other members of his party

have decided that it is not good enough for them. Has the Minister received any representations about the undersale in supermarkets of Calvin Klein and Levi jeans?

Mr. Griffiths: I have received representations from supermarkets asking for support for that practice. I have to inform the hon. Gentleman that our party conference is in Blackpool this year.

Manufacturing

Mrs. Caroline Spelman: What assessment she has made of the impact of the present exchange rate on British manufactured exports. [40954]

The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett): The Government understand industry's concerns about the strength of sterling and appreciate the difficulties it is causing exporters and manufacturers, but we are determined not to return to the boom and bust policies of the past. We are delivering a stable macro-economic environment, which will allow business to thrive in the long term.

Mrs. Spelman: Is the President of the Board of Trade aware that manufacturing output has fallen for the second consecutive quarter, thus confirming that the sector is now truly mired in recession? What action will she take to offset bleak prospects for exporters as their contracts come up for renegotiation at the higher rates of exchange?

Mrs. Beckett: I am aware of the figures on manufacturing output and I share the concern that has been expressed, although it is still expected that manufacturing output will rise over the year—indeed it is higher than it was a year ago—and the Confederation of British Industry's latest survey shows that manufacturers expect output to rise over the next four months. As for the action we are taking to help exporters, we have restored support for trade fairs, which was cut by the previous Government; we have introduced a programme called export explorer and a programme to address sales leads on the internet; and we have increased support for trade exhibitions and seminars—all of which follows on from a report by the export forum, which the Government set up to take advice from exporters on work that would help them.

Mr. Denis MacShane: Is my right hon. Friend aware that there were increased output and exports from the engineering sector in the first quarter of this year and that the fall in sterling resulting from the clarification on the euro has been welcomed by our manufacturing sector? Most important, is she aware that between May 1990 and May 1997 the value of the pound against the deutschmark changed no fewer than 87 times; and that 20 per cent. of the rise of sterling took place in the last 12 months of the irresponsible, flippant, yo-yo currency stewardship of the Conservative Government? They are to blame for any crisis that our manufacturers now face.

Mrs. Beckett: My hon. Friend is entirely correct. On Monday, I was with a very successful British manufacturer and exporter who went out of his way to tell


me that sterling has not yet reached the same level as it was under the previous Government. He showed me graphs to show how he had coped with it—by putting the emphasis on value and quality, which is the message of this Government, but not of the previous Government.

Mr. John Redwood: Far from abolishing boom and bust, the Government have pulled off the unique double of a bust in manufacturing while there is a boom in everything else. Is the President of the Board of Trade aware of the new fears, expressed in the City following the Bank of England's remarks that there will now probably be higher interest rates and a higher rate of sterling, which will do still more damage to manufacturing? What will she tell the Bank, which is blaming the Government's policy of the minimum wage and differential pay awards—and the higher pay that will result—for the threat of higher interest rates and higher sterling that will do more damage to manufacturing?

Mrs. Beckett: The right hon. Gentleman has clearly not paid attention to what the Bank actually said, because it did not say any of those things.

Mrs. Cheryl Gillan: It was in the Financial Times this morning.

Mrs. Beckett: I am afraid that the hon. Lady is wrong. The Bank said that the level of the minimum wage is important, that it retains its responsibility and concern for inflation and that it is confident that the policy is on course to deliver lower inflation. It said that it would be necessary to reassess its position and its concerns when the level of the minimum wage is announced, but that it did not intend to reach any conclusions in advance of that announcement—thereby showing a great deal more common sense than Opposition Members.
I do not think that it lies in the mouth of the right hon. Gentleman or his hon. Friends to complain about the level of sterling when they have done everything they could in the past few days to talk up the level of sterling by talking down the possibility of the euro.

Mr. Redwood: The President owes it to business to tell it what the minimum wage will be. It is the uncertainty that she is generating in the markets that is doing the damage. If she told us now what the minimum wage would be, the markets could assess the seriousness of a threatened wage explosion and the Bank could take the necessary action. Will she do that?

Mrs. Beckett: Unlike the right hon. Gentleman, the business community is perfectly well aware that the Low Pay Commission will report in the near future and that the national minimum wage will be introduced in April 1999. There is no worry on the part of business: it knows perfectly well what the timetable is.

Mr. Barry Sheerman: Has my right hon. Friend seen the recent KPMG survey that shows that since the value of sterling has been high there has been no increase in the number of firms calling in the receivers—which is very good news? Will she continue her campaign—which is much appreciated on Labour Benches—to make Britain's manufacturers more productive? That is part of the answer. We shall always

have problems with currencies going up and down—that is the truth of the matter—but it is essential to make our companies more productive, and we should continue to campaign for that as vigorously as possible.

Mrs. Beckett: My hon. Friend is entirely correct, and he has campaigned on this issue very effectively for a long time. I share his view completely, and we continue to discuss and address the matter.

Mr. David Chidgey: Given the damage that has been done to exporters by the recent high value of the pound and the continuing instability of exchange rates, does the President of the Board of Trade accept that the Government must make an urgent and clear commitment about early entry into economic and monetary union? If we do not do that, we shall not provide the confidence and stability that is needed. Will the right hon. Lady impress on the Chancellor that continuing uncertainty is holding back the essential investment that we need in industry, which is not helping to reverse the widening gap in productivity that was mentioned a moment ago?

Mrs. Beckett: I fully understand that that is the view of the hon. Gentleman and of his party, but it is not yet the view of business. Perhaps business will come to hold that view, but the business community—which we consult regularly about such matters—is not expressing it now. Secondly, I remind the hon. Gentleman that in a recent report the Bank of England suggested that, owing to the folly and neglect of the previous Government, it would take some years for British industry even to begin to be ready to go into the euro, should that decision be taken. Thirdly, I remind him that this Government are committed to the triple lock on that decision: Government, Parliament and the people must first decide.

Mr. Geraint Davies: Is my right hon. Friend pleased, first, that the markets are looking towards sterling's depreciation, and particularly that sterling is being sold at DM2.7 in the five years ahead market—partly due to George Soros and others, of course—and converging towards DM2.7; and, secondly, that many of the markets and investors are looking towards interest rates going down, so sentiments in the market are extremely positive for manufacturing exports?

Mrs. Beckett: My hon. Friend is right. The market is forecasting both lower interest rates and a lower exchange rate in the longer term, which suggests that the markets understand—as the Opposition do not wish to understand—that the Government are working for stability.

Rural Post Offices

Mr. David Rendel: What assessment she has made regarding the impact of proposals for the increased commercialisation of postal services on rural post offices. [40955]

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): Both the Government and the Post Office are committed to maintaining the universal postal delivery service, the uniform tariff structure for postal services and a nationwide network of


post offices. Specific proposals for greater commercial freedom for the Post Office will be assessed against those commitments and their contribution to meeting the challenges of changing domestic and international markets for postal services.

Mr. Rendel: I am grateful for that reassurance, which will be appreciated by rural post offices in particular. Does the Minister share my concern that increasing commercialisation could lead to the Post Office's beginning to centralise some of its services so that it can concentrate more on the commercial aspects that may bring in increasing profits? Could not that lead to a further run-down in rural post offices? What does the Minister propose to do about that?

Mr. McCartney: The hon. Gentleman's fears are unfounded. The principle of the review is to maintain and develop the network of 19,200 post offices. Let us remember that only 5 per cent. of villages in Britain have a bank, but 60 per cent. have a post office. Today we announced a new arrangement for the Post Office with British Gas, which will provide new services through sub-post offices. We are looking for business opportunities not for the centre, but for sub-post offices. The Government have given that commitment from day one and will continue to do so, because the Post Office and its services are critical to daily life in Britain.

Mr. Martin O'Neill: I congratulate my hon. Friend on the progress that has been made in the review of the Post Office's functions and the Government's acceptance of the Trade and Industry Committee's recommendation that additional commercialisation in the public sector will generate the funds necessary for rural post offices to be protected, so that their services will be available to people in the more distant parts of the country.

Mr. McCartney: I thank my hon. Friend. The Government have lifted the fear of privatisation that for so long hung over the postal services under the previous Government. We are moving forward to deliver a new postal service that will ensure, in rural and urban areas and internationally, new business opportunities for the Post Office in general and for sub-post offices in particular.

Mr. Richard Page: Despite the apparently comforting response to the hon. Member for Newbury (Mr. Rendel), are not the Government's proposals too little and too late? Everybody wants the Post Office to have greater opportunities from commercialisation. Other postal administrations are already going down that route—the Dutch post office has purchased TNT and the German post office has taken a 22.5 per cent. stake in DHL. When will the Government do a BT and set the Post Office free?

Mr. McCartney: The hon. Gentleman is a failed Minister at the Department of Trade and Industry. It is no good his coming now, so many years later, to ask Ministers at the Dispatch Box how we are rebuilding a Post Office from the wreck left by the previous Government. From day one of this Government we have made the Post Office a priority, and we shall continue to do so.

Manufacturing

Mrs. Diana Organ: If she will make a statement about the competitiveness of British manufacturing industry. [40956]

The Minister for Competition and Consumer Affairs (Mr. Nigel Griffiths): United Kingdom manufacturing productivity is 20 per cent. lower than that in Germany and France and 40 per cent. lower than that in the United States. It is critical that we improve. Last year, my right hon. Friend the President of the Board of Trade established six business-led working parties whose conclusions are shaping the forthcoming White Paper on competitiveness.

Mrs. Organ: In shaping the future White Paper on competitiveness, what assessment has the Department of Trade and Industry made of manufacturing output, investment and employment during the period July 1989 to April 1992?

Mr. Griffiths: Output fell by 2 per cent. a year on average, investment fell by 7.8 per cent. and 750,000 people in manufacturing lost their jobs. Throughout those years, the right hon. Member for Wokingham (Mr. Redwood) was a Minister at the Department of Trade and Industry presiding over the decline. Under my right hon. Friend the President of the Board of Trade, the last three months' figures show that manufacturing output, exports and employment are up.

Sir Peter Tapsell: Does the Minister recall that, when the dollar was floated in 1971, there were DM8.5 to the pound compared with a little under DM3 today and 600 yen to the pound compared with a little over 200 today, yet in the 25 years that followed the Smithsonian conference in 1971 the German and Japanese economies not only prospered, but their productivity outpaced that of all other industrial countries in the world? Does not that show that a strong currency, if properly handled by industry, can be of immense benefit to an exporting industrial economy? Is that not in fact the real nature of the golden economic legacy the Government have inherited from the Conservative Government?

Mr. Griffiths: Far from it. If the hon. Gentleman cares to join me in talking to the CBI and manufacturers throughout Britain he will realise that they know that the previous Government's record on manufacturing and business was abysmal. It is fortunate that in the past quarter figures have improved and that the Government have taken firm steps which, had they been taken 18 years ago, would have put our business record on a much better track.

Low Pay Commission

Mr. David Hanson: If she will make a statement about the work of the Low Pay Commission. [40957]

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): The Low Pay Commission has completed its comprehensive programme of consultation to obtain views of employers, employees, interested organisations and individuals on the national minimum wage and related issues. It also undertook a series of visits to seek local opinions throughout the UK, including Wales. I understand that it is on course to make its recommendations to the Government by the end of this month.

Mr. Hanson: Is my hon. Friend aware that the Low Pay Commission's recommendations will be particularly welcome in Wales, where 43,000 people still earn less than £2.50 an hour and where 2,000 of my constituents are condemned to family credit by low-pay employers? Can my hon. Friend confirm that, at the end of the Tory years, the inequality in pay levels was greater than it was in Victorian times? In view of that, will he take the opportunity to ask the right hon. Member for Wokingham (Mr. Redwood) about his views on the minimum wage, given his leader's support for it?

Mr. McCartney: I can confirm that the legacy of the previous Government was one of the highest ever levels of poverty and low pay in the United Kingdom. Whether in Wales, Scotland, England or Ireland, the levels of low pay were truly horrendous. The right hon. Member for Wokingham (Mr. Redwood) will have to answer for himself, but it is interesting to note that he has not yet given any support to his party leader, who has made a policy U-turn in that he is now willing to accept the introduction of a minimum wage. Perhaps the right hon. Member for Wokingham will say whether he will continue to oppose the introduction of a minimum wage following the recommendation of the Low Pay Commission.

Mr. Tony Baldry: Before the Minister disappears from the Dispatch Box, will he agree that the minimum wage can be summed up simply? If it is set at or below market levels it will be otiose; if it is set above market levels it will lead to a loss of jobs. Is not that the simple fact?

Mr. McCartney: When Conservatives talk about the minimum wage, they usually use the word odious rather than otiose. I shall give the hon. Gentleman a simple explanation: the minimum wage will be good for business and good for the workers. It will be equitable and its level will be set due to economic circumstances. Millions of people in Britain are ready and waiting for its introduction.

Mr. Chris Pond: Can my hon. Friend confirm that 80 per cent. of the electorate, including two thirds of those who still admit to being Conservative supporters, believe that a national minimum wage is a good idea and support it firmly? They understand that it is not only a way of dealing with the major social injustice left by the previous Government, but good business sense. Will he also confirm for Conservative Members who still carry around their 0-level economics textbooks that the evidence shows that a minimum wage can help to enhance productivity, efficiency and, therefore, employment?

Mr. McCartney: My hon. Friend is absolutely right. The only people in Britain who oppose the introduction of a minimum wage are the Rag, Tag and Bobtail outfit in front of us—the shadow Department of Trade and Industry team. A majority of businesses and, overwhelmingly, the people of Britain want a national minimum wage to be introduced. International and national comparisons—I include the United States in that—show that a sensibly introduced minimum wage helps to create jobs, not to destroy them.

Mr. Tim Boswell: At least we now know from the Minister that the figure will be published in a fortnight. We can then start the fully informed debate on the subject.
Has the Minister noticed yesterday's news on inflation and the concern expressed by the Chancellor about increases in the private sector, especially in pay rates? Has he noticed the warnings in the Bank of England's inflation briefing about the fact that its computations could take no account of the recent decline in the exchange rate or the introduction of the minimum wage? What conclusions has he drawn about likely implications for pay differentials, for inflation and for the future course of interest rates?

Mr. McCartney: Why should there be surprise that the Bank of England seeks to have a view on any report published by the Low Pay Commission? The Government made it clear from the outset, when we established the LPC, that it would have to make recommendations based on economic circumstances, which include issues surrounding the economy, including inflation. There is nothing new in that.
There is also nothing new in the Government talking to people in the labour market about pay restraint, and that includes people at the top of the tree. Unlike the hon. Gentleman, we are prepared to be even about the matter and to say to people at the very top, including those who support the Conservative party and campaigned against the minimum wage, that it is about time they showed pay restraint and that there should be social justice at the bottom through the introduction of a minimum wage.

Mr. Michael Clapham: In the context of the minimum wage and the fairness at work package, has my hon. Friend had discussions with United Kingdom-based multinationals such as Rio Tinto about the need to promote human rights and to protect the environment in areas of the world where they practise?

Mr. McCartney: I thank my hon. Friend for asking such a good question. Through trade arrangements and arrangements in Europe, the Government regularly work nationally and internationally to ensure that agreements in trade organisations include human rights and employment and environment rights. We have been negotiating in the World Trade Organisation, in the multilateral agreement on investment and in other international agreements to ensure fair standards throughout the world, including in multinational companies working in third-world countries. The Government are clear about that commitment. We meet business all the time. Inward investors come to Britain for our skills and knowledge and, in the main, provide good business practice, which I welcome.

Economic and Monetary Union

Mr. Nigel Evans: What assessment she has made of the effect the introduction of EMU in other EU states will have on the competitiveness of British firms. [40958]

The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett): Economic and monetary union will create both opportunities and competitive challenges: opportunities for British companies that are prepared to expand into new markets as trade becomes more open in the euro-zone, but challenges for the unprepared.

Mr. Evans: The assistance given by the DTI team to help Back Benchers with their questions is legendary. I should like to thank the Secretary of State's parliamentary private secretary for her assistance with this question. It is a great shame that, although the questions are inspired, the answers never are. When will the Government take responsibility for the fact that their policies have led to the strength of the pound? The Government's acceptance of the fudged criteria has allowed 11 other countries to go ahead with the single currency. If they want British companies to be competitive in Europe and in the rest of the world, they should listen to Jacques Delors, who said that deregulation and competitiveness had enabled Britain to become a magnet for inward investment. The Government's adoption of the social chapter and the minimum wage will make British companies uncompetitive with the rest of Europe.

Mrs. Beckett: The hon. Gentleman is clearly unaware that two thirds of the increase in sterling took place before the election. Consequently, it is hard to see how the Government's policies can be held responsible for the strength of the pound. Perhaps he was not present earlier when I pointed out to the right hon. Member for Wokingham (Mr. Redwood) that it is no good Conservative Members complaining about the level of sterling being too high, when by trying to damage confidence in the euro they are talking it up.

Mr. Jim Cousins: Will the Secretary of State acknowledge the good work of companies such as Siemens that intend to trade in the euro internally in Britain and to offer advice and guidance to their suppliers and to those to whom they sell about how they, too, can trade in the euro so as to obtain the advantage of currency stability and gain practice for selling to European markets? Does she welcome that? Will she give an undertaking that the DTI will follow through that example and offer assistance to smaller businesses?

Mrs. Beckett: It has often occurred to me that one of the greatest failures of the Conservatives in government was not preparing themselves for the advent of the euro and giving British business, especially small and medium enterprises, which will be the most vulnerable, the impression that the only thing that mattered was whether Britain went in. They failed to point out to businesses that they will be affected by the launch of economic and monetary union whatever decision Britain makes. My

hon. Friend is right about the need to give advice and support to businesses. We are doing that in a variety of ways, including a series of regional seminars.

Mr. Edward Garnier: What evidence did the President of the Board of Trade rely on in her main answer to my hon. Friend the Member for Ribble Valley (Mr. Evans)?

Mrs. Beckett: I am not quite sure what the hon. and learned Gentleman means. I told the hon. Member for Ribble Valley (Mr. Evans) that there will be both opportunities and challenges. We have consulted extensively with British business, and that is very much its view. The challenges are obvious: I was just referring to them. People who are unprepared will face difficulties. As to the opportunities, British businesses that are genuinely competitive may find that, in the euro-zone market, price transparency will give them a potential competitive advantage. It is therefore all the more essential that businesses that could prosper in that environment take advantage of that opportunity.

Automotive Industry

Barbara Follett: What action she has taken to promote the competitiveness of the automotive industry. [40959]

The Minister for Science, Energy and Industry (Mr. John Battle): The Department is taking a number of measures to encourage all parts of the automotive industry to maximise their international competitiveness and to strengthen the United Kingdom's advantages as a location for investment.

Barbara Follett: I thank my hon. Friend for that reply and congratulate him and his Department on their efforts to foster research between universities and industries. Combined with the foresight initiative, that will do a great deal more to ensure the future competitiveness of the British automotive industry than was ever done by the Rag, Tag and Bobtail—and otiose—outfit opposite.

Mr. Battle: My hon. Friend refers to the foresight programme. In particular, the work of the cleaner vehicles task force looks to the future of the automotive industry, and to new technologies that will provide new jobs and go some way to tackle environmental problems. I would add only that, in order for the industry to be competitive, we must strengthen back-up companies, and ensure that the sector is strong as we move into a new century.

Mr. John Bercow: What rationale can the Minister offer for the Government's policy of, on the one hand, encouraging people to abandon their cars and use public transport, and, on the other hand, handing out large subsidies to car manufacturers in an attempt to boost their competitiveness? Can the hon. Gentleman get his mind around that paradox, and explain it for the benefit of the House?

Mr. Battle: I had not previously heard the Conservatives campaigning for the abolition of the car; now, it seems, they are. The scheme to which my hon. Friend the Member for Stevenage (Barbara Follett)


referred is a middle way towards achieving cleaner vehicles. One option would be to ensure that vehicles burned more environmentally friendly fuel. I do not think that improving the environment ought to be set at odds with vehicle use. The two are not, and will not be, at odds under this Government.

Mr. Richard Burden: My hon. Friend will be aware of the importance to the west midlands of the motor industry, including, in particular, the major Rover Group plant at Longbridge in my constituency. Will he take this opportunity to congratulate Rover on exports worth £3.7 billion last year, which is the company's highest ever figure? Is that not a tribute to Rover and its work force, and to the stable environment that the Government have generated for the motor industry?

Mr. Battle: I am happy to endorse what my hon. Friend says. According to the latest figures, United Kingdom car production is at its highest for 24 years, and represents 10 per cent. of UK exports. It is a successful sector, and will continue to be so under the Government.

Post Office

Mr. Alasdair Morgan: What discussions she has had with the Post Office regarding minority share sales. [40960]

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): I have discussed with the Post Office our wish to give it the commercial freedom that it needs to meet changes in domestic and international markets. The Government have commissioned a review of possible options for achieving that, and the Post Office is closely involved in the work. A minority share sale is just one of the options for consideration.

Mr. Morgan: The Minister is aware that the public are against privatisation of the Post Office, but is he aware that they will also be deeply sceptical about any move to sell shares in the Post Office? Is he prepared to put an upper limit on the percentage of shares to be sold, or—even better—will he rule out the option altogether?

Mr. McCartney: The terms of reference are unequivocal. The Post Office will remain in the public sector, and will continue to provide a universal postal service under a uniform structure with a nationwide network of post offices. Privatisation is off the agenda: it is not part of the Government's policy. We have made it absolutely clear that we are seeking to create joint ventures involving the public and private sectors, and the creation of a public sector trust and an independent public corporation. A range of issues is being considered, and, when the issues have been considered, we will bring proposals before the House—probably in the autumn—to take the Post Office into the next century.

Mr. Desmond Swayne: Is the Minister aware of the level of public disquiet already caused by competitive pressures, which has led to the extraordinary phenomenon of two public demonstrations

in New Milton regarding closure of Ashley Stores post office? Will he meet a delegation of my constituents to hear their concerns?

Mr. McCartney: I understand the hon. Gentleman's feelings. Thank goodness he has a Labour Government, who will save the Post Office from the damage caused by the last Government. If the hon. Gentleman will write to me about his case, I will be prepared to see him to discuss it, because I have an open-door policy. Let me make it absolutely clear that the Government are safeguarding the rural and urban network that the last Government wanted to privatise.

Arms Exports

Mr. David Heath: How many licences have been granted for the export of arms to Indonesia in the current year to date. [40961]

The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): Between 1 January and 3 April 1998, 28 individual licences were issued covering the export to Indonesia of goods that are listed in part III of schedule 1 to the Export of Goods (Control) Order 1994. The list is much broader in scope than just arms, and includes a wide range of equipment. All the applications for the 28 licences were circulated for advice to the Foreign and Commonwealth Office and to the Ministry of Defence, and considered under the criteria that were announced last July by my right hon. Friend the Foreign Secretary.

Mr. Heath: Why are we in the business of selling arms to a regime that is bankrupt both politically and economically? Is the Minister not concerned when she sees democratic demonstrations in Jakarta being put down by British-made water cannon firing British-supplied nerve gas? What price an ethical foreign policy?

Mrs. Roche: The Government are extremely concerned by the current situation and are monitoring it very closely. The hon. Gentleman will also want to know that, since coming to power, we have refused licence applications for Indonesia covering sniper rifles and other firearms, spare parts for firearms, military vehicles and a military simulator. As I have said, we are monitoring the situation very carefully and we are looking at reports that water cannon, supplied from the UK under licences that were issued by the previous Government, have been used.

Ann Clwyd: Will my hon. Friend confirm that Indonesia is covered by export credit guarantees of more than £1 billion and that £800 million of that is for military exports? Would it not be better if we had a debate in Parliament about whether arms should be exported to sensitive countries, as happens in the United States Congress? In the circumstances, will she urge her right hon. Friends to freeze all arms sales to Indonesia as from now?

Mrs. Roche: No, I certainly cannot give my hon. Friend that assurance. She knows that we continue to monitor the situation very carefully. It was this Government who, unlike the previous Government, introduced the criteria by which every application is


measured. We already give information on those other matters. Of course, it is for the business managers to decide when debates can take place, but my hon. Friend might wish to pursue other actions open to her to secure a debate on the Floor of the House.

Mr. John Redwood: What does "ethical policy" mean when we see farces day by day, over Sierra Leone and now Indonesia? Did the Foreign Office receive the documents? Did it read them? Why did DTI Ministers not themselves see that there would be an unfortunate circumstance if the Indonesian regime used any of the materials—these armaments and anti-riot goods—against its own population, as we see it doing on television now? Why did not the Minister, and particularly the President of the Board of Trade, understand the sensitivity of the matter? Was the Foreign Office asleep on duty again? How can the Minister explain the 56 export licences under her Government?

Mrs. Roche: The right hon. Gentleman is speaking absolute nonsense. This party—the Government—will take no lectures from him or from the Conservative party. They had no criteria. It was my right hon. Friend the Foreign Secretary who introduced the criteria and who has fully answered all the questions on this matter. I have clearly said that there have been refusals because we are concerned about the situation and we are monitoring it on the ground. We will not take any lectures from the right hon. Gentleman, thank you very much.

National Minimum Wage

Mr. Tony McNulty: When she expects the Low Pay Commission to report its recommendations for a national minimum wage to her Department. [40962]

The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): I expect the Low Pay Commission to make its recommendations to the Government by the end of this month on the level at which the national minimum wage might be introduced.

Mr. McNulty: I welcome that response and the earlier response to my hon. Friend the Member for Delyn (Mr. Hanson), as will the 1,000 families in Harrow in north-west London who still rely on family credit. I know that this is tedious for my hon. Friend, but will he try again to elicit the views of the right hon. Member for Wokingham (Mr. Redwood) on this issue? We know that the right hon. Gentleman can be forthright because we have read his views about the Leader of the Opposition. Will my hon. Friend try to ascertain, in the interests of consensus—

Madam Speaker: Order. I have told Back Benchers before that it is for the Government to account for their policies and actions, not those of the Opposition.

Mr. McCartney: That was a good try by my hon. Friend.

Madam Speaker: No, it was not.

Mr. McCartney: You, Madam Speaker, say that it was not a good try, and I will not challenge your wisdom.
My hon. Friend is absolutely right. The Government have, at great speed, taken the opportunity to introduce a national minimum wage. Conservative Members, particularly the right hon. Member for Wokingham (Mr. Redwood), have been wriggling on this matter for the past six weeks. The right hon. Gentleman does not want to agree with the Leader of the Opposition. He is a one-man band and a one-man party, and soon he will be the only person in Britain who does not support the minimum wage.

Miss Anne McIntosh: Does the Minister have a message for my constituents, particularly those in the hotel, catering and restaurant business, who fear that their jobs may be lost owing to the introduction of a minimum wage?

Mr. McCartney: I know that industry very well because I am a former chef who was sacked for having the audacity to ask for a £1 a week wage increase because of the birth of a child. I take no lessons about the poverty of those who work in that industry from the hon. Lady. It is interesting that the industry supports the national minimum wage. It is sick and tired of being smeared as a low-pay, low-activity industry and wants to change its image, which is why it is now working with the Government towards the successful introduction of the minimum wage.

Utilities (Regulation)

Mrs. Louise Ellman: What plans she has to change the regulatory framework for the utilities to give increased priority to consumers' interests. [40963]

The Minister for Science, Energy and Industry (Mr. John Battle): It is the Government's intention that consumers' interests should be put at the heart of the regulatory system. We said that we would change that system, and we are working towards that. That is why my right hon. Friend the President of the Board of Trade published on 25 March a Green Paper on utility regulation—"A Fair Deal for Consumers: Modernising the Framework for Utility Regulation".

Mrs. Ellman: Will my hon. Friend give me a categorical assurance that the new regulations will be strong enough to deal with the casualties of Tory utilities privatisation? Will they be able to deal with the legacy of fuel poverty, whereby poorer people get the worst deal? Will they be able to deal with the outrageous situation whereby the privatised water companies have increased bills to domestic consumers by an average of more than 95 per cent. since privatisation?
Will my hon. Friend consider making the new regional chambers the focal point of consumer representation in the regions, perhaps by enabling them to call hearings where the utility companies have to come to be called to account by public representatives?

Mr. Battle: I can give my hon. Friend that absolute assurance. The Green Paper includes a substantial programme of action inviting the regulators and the industry to develop a clear action plan to ensure that poorer consumers enjoy more of the benefits of the


privatisation programme. As she rightly said, we inherited a legacy of fuel poverty and there is a horrendous difference between those who can use direct debit schemes and those who are in the trap of having self-disconnecting meters. We have not just been waiting for the White Paper; our response to fuel poverty included reducing VAT on fuel. Proposals for consultation of consumers are also included in the Green Paper.

Dr. Vincent Cable: Is the Minister aware of a serious anomaly in the regulation of the utilities that has arisen this morning because a consortium of local authorities representing the three major parties has been obliged to pull out of the terminal 5 inquiry because of a lack of funding, whereas a regulated monopoly—BAA—is continuing with the support of taxpayers' money because it has been able to offset its costs against tax? Will he undertake to speak to the Chancellor and the Secretary of State for the Environment, Transport and the Regions to ensure that that undemocratic anomaly is addressed as soon as possible?

Mr. Battle: I shall certainly speak to my colleagues in other Departments. If the hon. Gentleman has not had an opportunity to see the Green Paper, I should tell him that it is confined to gas, water, electricity and telecoms. I shall take the matter further with colleagues at the Department of the Environment, Transport and the Regions.

Mr. Eric Forth: Before the Minister gets too impressed by his Back Benchers' rhetoric and crocodile tears over increases in some utility prices, will he take into account the impact of the huge council tax increases levied by Labour-controlled local authorities, and set them against the lousy level of services that most of those authorities deliver?

Mr. Battle: I would be delighted to get carried away with the record of Labour councils, which have done a brilliant job over the years, under incredible pressure from a Conservative Government. They delivered services as the Conservative Government reduced their budgets year on year. Indeed, those councils were usually the ones picking up the pieces following Tory legislation.

Mr. David Drew: In my area, we have had the road dug up for the past two months, thanks to Severn Trent Water, the telephones were off on Monday, thanks to BT, and it is guaranteed that any train run by Great Western Trains will be late into Paddington. Does my hon. Friend agree that we cannot wait a moment longer for greater powers for the regulator?

Mr. Battle: As my hon. Friend suggests, the Green Paper proposes to improve the accountability, consistency and transparency of the regulatory process. We believed that it needed reforming; we stated in opposition that we would set about that task. The Green Paper is out for consultation, which closes on 31 May. We will then act on that consultation. Consumer groups and the utilities alike have responded very positively to the Green Paper.

Electronic Commerce

Mr. Ian Bruce: What proposals her Department has to promote electronic commerce. [40964]

The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): Electronic commerce is extremely important and the Government are committed to ensuring that all United Kingdom citizens and businesses have the opportunity to share in its benefits. The Government's programme of linked initiatives in the area is outlined in the policy statement "Our Information Age: the Government's Vision", which was launched by my right hon. Friend the President of the Board of Trade last month.

Mr. Bruce: I thank the hon. Lady for her reply. Does she agree that the best way in which the Government can help to promote electronic commerce is to use it themselves and ensure that, as a major buyer of IT, they are fully compliant and have everything working well, rather than considering subsidies or special schemes? Will she have a word with Ministers in all Departments so that at least they are on board and we Members of Parliament can write to them via e-mail? Still, hardly any Ministers publish e-mail addresses.

Mrs. Roche: I understand the hon. Gentleman's point. He takes a close interest in these issues. It is absolutely right that the Government should lead by example, which is exactly what we are doing. It is important that everybody embraces the benefits that electronic commerce can bring, which is why the Government are doing all that they can in forums such as IT For All and our programme for business. I shall certainly take his points on board. I am sure that he will be pleased with the progress that we have been making.

Mr. Stephen Timms: I particularly welcome the publication of "Our Information Age: the Government's Vision", which is an excellent and very impressive statement of the Government's vision in the area. Is not the great disappointment that, in the framework of telecommunications that the previous Government put in place, we have not secured the widespread access to innovative and advanced telecommunication services that we were promised at the time? Is not that the missing jewel, and what we need if we are to be successful, as we all hope, in the implementation of electronic commerce?

Mrs. Roche: My hon. Friend, who is also an expert in these matters, puts his finger on it. We need to do two things. First, we need to ensure that the single market in telecoms in Europe is implemented and a true reality. The Government are absolutely committed to that. All the new services that will flow from that must be provided on the basis that new entrants can tap that newly liberalised market. Secondly, we need to ensure that all our citizens feel comfortable with new technology; that manufacturers ensure that it is as easy to use as possible; and that all businesses, including small and medium-sized businesses use it, too.

Mrs. Cheryl Gillan: In her enthusiasm for electronic commerce, the Minister will appreciate that businesses are interdependent electronically on an international basis. Has she therefore considered the effect of the millennium bomb on businesses in other countries and the consequences for United Kingdom business of supply-chain failures?
What contingency plans has the hon. Lady made to protect British services and systems against failures elsewhere in the world, which would have a severe knock-on effect on the British economy? Does she appreciate the fact that unless she has well publicised and well thought-out contingency plans, this country may find Labour's slogan coming back to haunt it, and the failures of the few will affect the many?

Mrs. Roche: I think that the hon. Lady was referring to the millennium bug rather than the millennium bomb. That aside, she will know that in the short period in which the Government have been in office we have put in place proposals to spend 17 times more resources than the Government of which she was a member spent in the past 18 years. None the less, the hon. Lady made an important point—[Interruption.] Perhaps the hon. Lady will stop talking and allow me to finish. She made an important point about what needs to be done internationally. I am pleased to say that last Friday the United Kingdom hosted an important international event for our EU partners, which I addressed. There is a serious problem, and that is why the Government are putting in so much time and effort.

Competitiveness UK Initiative

Dr. Stephen Ladyman: If she will make a statement about the progress of her Competitiveness UK initiative. [40966]

The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett): I set up six business-led working parties last year to look specifically at the weaknesses in United Kingdom companies' performance identified in "A Benchmark for Business", which I published in November 1997. The working parties are examining underinvestment, failure to innovate and to adopt best practice, shortage of skills in the work force, and failure to capitalise fully on the opportunities provided by the information age and by our membership of the European Union. Their work will contribute to a White Paper on competitiveness, to be published in the autumn. In parallel, my right hon. Friend the Chancellor of the Exchequer and I met senior business people this morning in the first of a series of seminars to discuss how to bring about improvements in UK productivity.

Dr. Ladyman: Does the President agree that, under the Tories, too many companies came to believe that, to achieve competitiveness, all they had to do was to cut staff and wait for a devaluation? How does my right hon. Friend plan to convince companies that the only way to achieve competitiveness is to invest in their staff, in new equipment and in research and innovation? In doing that, will she use as an example Pfizer, a company in my

constituency—my former employers, in fact—whose huge investment in research has created the world's greatest drug discovery team—

Madam Speaker: Order. I could give the hon. Gentleman an Adjournment debate if he wishes—but now I want to move on through the Order Paper. Come along.

Dr. Ladyman: Will my right hon. Friend use as an example of good practice the innovations of Pfizer, whose great team has discovered Viagra, which has been much publicised and is, I suspect, eagerly awaited in all parts of the House?

Mrs. Beckett: My hon. Friend is entirely right about the importance of the factors to which he drew attention in terms of investment in skills as well as in a variety of other ways. One of the issues that we discussed this morning with business—and will continue to discuss with the business community—is how to get those messages across throughout English business, including small and medium-sized businesses. There seems to be general agreement that a combination of best practice, mentoring and, in particular, business people themselves spreading the word down the supply chain, seems likely to produce the most effect. We are continuing to discuss the issues. I am aware of the tremendous reputation of Pfizer, which has substantially increased its inward investment in this country since the Government came to power.

Mr. David Prior: Does the right hon. Lady believe that the compulsory recognition of trade unions will improve the competitiveness of British industry?

Mrs. Beckett: The hon. Gentleman is labouring under a misapprehension. The Government will introduce a framework of legislation to bring about the recognition of trade unions should a majority of the work force wish. That is a simple human right, and I am surprised that the hon. Gentleman opposes it.

Kyrgyzstan

Mr. Andrew Robathan: If she will make a statement on United Kingdom trade relations with Kyrgyzstan. [40967]

The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): Trade relations with Kyrgyzstan are the warmest they have been since the country achieved independence. The country is preparing for clear and rapid integration into the global economy and we fully support its efforts to join the World Trade Organisation on the right terms.
The Prime Minister of Kyrgyzstan is in London with a large delegation of Ministers for an important investment conference and I shall be meeting him and his colleagues for discussions later this afternoon.

Mr. Robathan: I am delighted that the Minister is meeting the Prime Minister of Kyrgyzstan today. I know that that Prime Minister and his colleagues in the Kyrgyz Parliament and Government are grateful for the support they have received from this Government and the


previous Government as the country comes out of its past in the Soviet Union. Will the Minister confirm whether export credit guarantees now cover Kyrgyzstan, and whether the know-how fund can be used to greater effect there?

Mrs. Roche: I should be interested in any representations that the hon. Gentleman might care to make to my ministerial colleagues and me about the use of the know-how fund. As regards export cover, officials from the Export Credits Guarantee Department visited the country last month to review the position. The review will take some months and it would be unwise to predict the outcome.

Mr. Tam Dalyell: Given the importance of Kyrgyzstan—especially in light of this morning's

conference, attended by many in British industry—and that country's commitment to democracy, and given the fact that the Kazakh capital is moving from Almaty, will the Government reflect on whether it would be wise to have an embassy with trade officials in Bishkek as separate from the embassy now covering both Kazakhstan and Kyrgyzstan?

Mrs. Roche: I am glad that my hon. Friend found the conference so useful. From what we understand, it was a great success. On the specific question he asked, we have no plans at present to move diplomatic representation from Almaty, so cover for the country will continue as it is. In the longer term, we will take into account my hon. Friend's representations.

India (Nuclear Tests)

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): With permission, Madam Speaker, I should like to make a statement on the recent nuclear tests in India.
On Monday, the Government of India announced that they had conducted three nuclear tests, including one thermo-nuclear device. On Wednesday, the Government of India confirmed two further nuclear tests. According to a statement by the Government of India yesterday, the last two complete the planned series of nuclear testing. These were India's first nuclear tests since 1974.
Nuclear proliferation is a serious threat to the stability and security of the international community. We and our partners have sought vigorously to prevent the technology and equipment for nuclear weapons programmes from being acquired by states that might use them to develop a nuclear weapons capacity. Last weekend, the G8 Foreign Ministers committed our countries to strengthen further the safeguard systems against nuclear proliferation. The recent nuclear tests by India undermined the efforts of the international community to prevent nuclear proliferation, and may encourage other states that wish to do the same.
Nor will these tests help the security of India. An increase in tension in the region cannot be in the interests of India, and the escalation of an arms race in the sub-continent cannot help to tackle the poverty in which millions of its people live. The sharp reaction by China demonstrates the danger that such tests will increase tension, rather than strengthen security.
We have already expressed our dismay to the Indian Government. Yesterday, the acting high commissioner for India was summoned to the Foreign Office in order that we could express our concern at the test programme. In New Delhi, our high commissioner led a troika of European Union ambassadors to inform the Government of India of the concern not just of Britain, but of all Europe. I can inform the House that I have today recalled our high commissioner from Delhi for consultation on how Britain and Europe can effectively bring home to the Government of India our anxiety at the damage of these tests to the non-proliferation regime and to the stability of the region.
We shall also seek to co-ordinate our response with our major international partners. Tomorrow's G8 summit in Birmingham will consider how our countries can work together to bring home to the Government of India the dismay of the international community at the resumption of nuclear tests. In a week's time, at the next meeting of the General Affairs Council, we shall seek a common approach by Europe, making clear our opposition to this new challenge to the non-proliferation regime.
The urgent task now is to do all that we can to prevent the tests from provoking other tests in the region. Our high commissioner in Islamabad has led representations by the European Union troika, conveying to the Government of Pakistan our strong view that Pakistan's interests would not be served by a regional arms race. We are urging Pakistan's leaders to show restraint at what we acknowledge is a difficult time for them.
We regret and condemn these nuclear tests. Britain is a leading advocate of the comprehensive test ban treaty and of the non-proliferation treaty. We firmly believe that

their provisions provide Britain and all members of the international community with the strongest basis for confidence in their international security. Nobody's long-term interests are secured by encouraging the spread of nuclear weapons. I am sure that the whole House will want to support the Government in sending a united message on behalf of Britain that we oppose and condemn the tests.

Mr. Michael Howard: Conservative Members share the right hon. Gentleman's concerns about the nuclear tests that India has carried out and at the prospect that that dismal example may be followed by Pakistan. Nuclear proliferation is one of the greatest dangers faced by humanity as we move towards the millennium.
What position will the Government take, both in the European Union and at the G8 summit this weekend? We know that France and Russia are opposed to sanctions against India, but that the United States, Canada, Japan, Germany, Sweden, Denmark and the Netherlands are either imposing, or considering the imposition of, sanctions. On which side of that divide do the British Government stand?
Will the right hon. Gentleman tell us more about the prospects of India's now signing the comprehensive test ban treaty? What, if anything, can the British Government do to bring that about?

Mr. Cook: I shall respond first to the right hon. and learned Gentleman's last point. The Prime Minister of India has written to say that India may be interested in adhering to some parts of the comprehensive test ban treaty and to the fissile material cut-off treaty, of which Britain is a leading advocate. We welcome the suggestion that India is willing to be drawn into an international dialogue on arms control for nuclear weapons, and we shall seek to build on it. Our ambition must be for India not to adhere to parts of the comprehensive test ban treaty, but to sign, ratify and abide by the whole of what is intended as a comprehensive treaty.
I do not think that it helps our case to suggest, as the right hon. and learned Gentleman explicitly did, that there is a divide in the international community.

Mr. Howard: But there is.

Mr. Cook: There is no divide—there is a range of views on what measures it would be appropriate to use. I believe that the appropriate job for the presidency of the G8 this weekend will be to find the point of maximum unity. Certainly, measures will have to be taken to bring home to the Government of India the strength of feeling in the international community, but it is important that we act with unity and around the maximum point of that unity.
India has aspirations in the international community, particularly at the United Nations. It must now reflect soberly on whether its conduct over the nuclear tests has advanced or hindered those ambitions.

Mr. Gerald Kaufman: Is my right hon. Friend aware that what we are witnessing is not simply a matter of non-proliferation, extremely serious though that is, but the most dangerous nuclear missile race


in the world? Both India and Pakistan have not only the missiles to hit each other—and to poison each other and themselves—but the capability to put warheads on the missiles. Is he aware that the director of the CIA has told the United States Government that the confrontation between India and Pakistan is the most dangerous nuclear flashpoint in the world?
We cannot simply stand by—I know that my right hon. Friend does not intend to do that—and say that dealing with the issue on the basis of non-proliferation is enough. I hope that the Government will support sanctions when the G8 meets, but we must also take into account the fact that the reason for the confrontation is the canker of the unsolved problem of Kashmir. As long as the Kashmir problem remains unsolved, the confrontation will continue.
Will my right hon. Friend, who has great courage in these matters, bear it in mind that it is now the responsibility of the international community to intervene actively to try to bring about a solution to the Kashmir problem? Otherwise, a nuclear confrontation might well take place in the Himalayas.

Mr. Cook: I fully echo my right hon. Friend's concern that there are now three nuclear or near-nuclear weapons states in the region, among which great tension exists, and there have been two wars in recent decades. Those are matters of concern not only to those countries but to the international community as a whole. I also agree entirely that a just solution to the issue of Kashmir would do far more for stability and security in the region than any number of nuclear tests.

Mr. Menzies Campbell: May I associate myself with the Foreign Secretary's expressions of regret and condemnation? Does he agree that if the nuclear tests have caused anger among India's enemies, they have most certainly caused profound disappointment among its friends, of whom there are many in the House? Does he also agree that our condemnation would be rather more soundly based if the United Kingdom had done more to fulfil its obligations under article VI of the nuclear non-proliferation treaty, which requires us to seek general nuclear disarmament?
To show willingness to fulfil those obligations, will the Foreign Secretary confirm Labour's manifesto commitment to deploy no more warheads on the Trident system than there were on the Polaris system that it has replaced?

Mr. Cook: The hon. and learned Gentleman invites me to make a statement that properly belongs to my right hon. Friend the Secretary of State for Defence, but I can assure him that, as a general principle, we stand by all our manifesto commitments. Britain has been a leading supporter of the comprehensive test ban treaty, and the Government have urged it on all other countries and sought to encourage India to adhere to it.
We have also led the way in tabling proposals for a fissile material cut-off treaty, to try to cap further nuclear weapons programmes, and, in a range of forums, we have advanced ideas for international arms control, to try to create confidence among states that do not have nuclear

weapons that they do not need to achieve nuclear weapon status to match existing nuclear powers. I regret that India's action may encourage others to contemplate following its example.

Mr. Keith Vaz: Clearly these are issues of concern. Will my right hon. Friend ensure that, no matter what is said publicly, a constructive, positive and strong dialogue will continue with the Indian Government, who have a long-standing special relationship with this country? How can that happen, when he has recalled Sir David Gore-Booth? Will Sir David return to continue that dialogue? Will my right hon. Friend assure us that, no matter what happens at the G8 summit, we will not cut humanitarian aid to India?

Mr. Cook: I am happy to assure my hon. Friend that, after consultation, it would indeed be our intention that our high commissioner should return to Delhi. I do not disagree at all with the central point that it is important to maintain dialogue and contact with the Indian Government, in order that they may be fully aware of the dismay of their friends and allies in the international community at this development.
I can assure my hon. Friend that we do not contemplate withdrawing aid from India, which is the recipient of our largest aid programme anywhere in the world. We do not think that it would be right effectively to register our protest about a decision taken at the highest levels of Indian society by taking steps that would hit the poorest in Indian society.

Mr. Tom King: Is the right hon. Gentleman aware that, given not only this testing of nuclear weapons, but the fact that missiles are being tested and being supplied by China to one of the countries concerned and that there is every prospect and danger of a further test in the region, this could hardly be a more dangerous time?
The countries involved have a grievance which, as the right hon. Member for Manchester, Gorton (Mr. Kaufman) made clear, might make people on either side mad enough that they could conceivably justify the ultimate deterrent. In those circumstances and recognising that the test has blown a serious hole in the non-proliferation treaty, in particular the apparent credibility of the United States in being able to monitor any attempts to evade it, it is a matter of the greatest urgency in discussions with the United States and China that we should avoid the serious situation in which others will have observed and learnt from the experience of India. They must quickly be discouraged from following suit.

Mr. Cook: I can assure the right hon. Gentleman that we will co-ordinate closely with the United States on how we both react and will ensure that our messages reinforce each other to the countries of the region and to India in particular. He fairly outlined the intense security environment in which this event has taken place. I do not know that it could correctly be ascribed to the failure of the United States' intelligence or anyone else's—it had been well known for some time that India had a near-nuclear weapon capacity. What is distressing about the tests is the plain and evident decision of the Indian Government to display that capacity and to assert a


nuclear weapon's state role. I very much hope that it will be possible for us to pull back before other countries in the region feel obliged to respond.

Mr. Tony Benn: Is my right hon. Friend aware that, overwhelmingly, opinion throughout the world will share the concern, anxiety and alarm that have been brought about by the tests? He will be aware that there is a warm welcome for what he said about sanctions—that they should not be used against a people when the Government are responsible, which has some application to Iraq. Is he also aware that the statement he made against India possessing and testing nuclear weapons applies with equal force to this country? Indeed, it is difficult for a moral stand to be taken on that matter by the Government when, in the manifesto on which we were elected, we were utterly committed to the retention and possible use of nuclear weapons. There has to be some logic in this matter. India could certainly claim to have pursued that policy in line with the policies pursued by previous Governments in this country.

Mr. Cook: I have to say to my right hon. Friend that although the Government of India put forward a number of justifications for the nuclear tests, they have not put forward our possession of such weapons, although they have referred to other countries in the region. Also, there is no double standard on the part of Britain. We have not conducted nuclear tests for some time, and we are a signatory to the comprehensive test ban treaty, which we uphold. We believe that India's security would be better served by adhering to that treaty than by continuing to develop nuclear weapons.

Mr. Crispin Blunt: Would not the people of India be justified in thinking that there is just a whiff of hypocrisy in our reaction, as the fact that India has possessed nuclear weapons has been known for more than a quarter of a century? Is not India's position analogous to that of France? Having tested its weapons on Mururoa and made the next generation of nuclear weapons secure, France then signed the comprehensive test ban treaty. Would not the best approach now be for Sir David Gore-Booth to remain in New Delhi and encourage the Indians to sign that treaty instead of maintaining their current position?

Mr. Cook: I have to say to the hon. Member that if I had come to the Dispatch Box today and welcomed Indian nuclear tests, I would have been roundly condemned from both sides of the Chamber, and rightly so. Nor is our condemnation simply that of a nuclear weapons state, as many countries that have no nuclear weapons and have never had any ambition to acquire them have also joined us in firm statements of concern, dismay and anxiety. Yes, it is our ambition that India should sign the comprehensive test ban treaty and we will continue to build on the modest opening that India has made for dialogue in that area.
We have recalled our high commissioner precisely so that we can together work out the best way of putting pressure on the Government of India to recognise the concern of the international community.

Mr. Harry Cohen: Does my right hon. Friend agree that the nuclear tests are damaging

to nuclear proliferation and regional tension, and that the resulting arms race will make poverty in the sub-continent much harder to deal with and will increase it? Does he agree that we should not give aid to Governments who spend a great deal of money enhancing their military forces and developing weapons of mass destruction?
Why are the Americans doing more than we are in acting against the Indian Government over the tests? Should we not stop direct Government-to-Government aid, while putting it through non-governmental organisations to help the poor directly? Will we stop export credit guarantees? Surely we should not subsidise, even indirectly, India's nuclear weapons programme.

Mr. Cook: I welcome my hon. Friend's robust support for our criticism of the nuclear tests. It is not fair for us to respond to them by withdrawing aid, which would affect the most vulnerable people in India. The aid that we provide is not handed over to the Government of India as some sort of funding arrangement, but is directly administered, overwhelmingly by us and often in collaboration with NGOs, to make sure that it gets through to the poorest people in the poorest regions of India, primarily in rural areas. I doubt whether it would be particularly effective pressure on Delhi were we to turn off that tap, but it would have an immediate and direct effect on communities living barely at the level of subsistence. I do not think that it is the appropriate response.
I do not disagree with what my hon. Friend said about the priorities of the Indian Government. One of the tragedies of the Indian sub-continent is that there are countries throughout the region whose defence budgets exceed their education budgets. That is unsatisfactory in areas of such poverty. I hope that it will be possible to achieve a reduction in tension which would result in a reduction of defence spending.

Mr. Alasdair Morgan: At this very tense time, should we not give a moral lead to the rest of the world by scrapping the Trident missile system and spending the money saved on health, education and increased aid to the rest of the world?

Mr. Cook: I have already told the House that this Government were elected on their manifesto and will abide by it. Our commitment on nuclear weapons was to pursue the goal of a nuclear-free world. An appropriate time as we approach that goal will be the time to consider the future of Trident, but our manifesto committed us to retaining Trident as long as there is a an external nuclear threat to Britain.

Mr. Peter L. Pike (Burnley): The Government of India are still a relatively new Government and a fragile coalition. Does my right hon. Friend believe that they now understand that they have probably made the most appalling mistake that they could have made? Their decision does not help to solve the problems of poverty, their desire to play a greater part in world affairs or to resolve the problem of Kashmir, which has existed for 50 years. They need to talk with Pakistan to solve that problem.
Is it not also crucial that Pakistan, which has a stable Government with a large majority, recognises that, however much it feels that its security may be threatened, the worst possible thing to do would be to respond with nuclear tests?

Mr. Cook: My hon. Friend finished with an important message for the Government and people of Pakistan. Its security and future relations with other countries in the sub-continent would be best served by retaining allies, partnership and respect throughout the international community. I hope that the Government of Pakistan will approach their present critical position by recognising that they have an opportunity to demonstrate to the international community their adherence to its standards and norms, rather than locking themselves into a competitive arms race.

Mr. Douglas Hogg: May I support the right hon. Member for Manchester, Gorton (Mr. Kaufman) in saying that a resolution of the outstanding issues between India, Pakistan and China should be an urgent objective of United Kingdom, European Union and United Nations policy? Has the Foreign Secretary any proposals in that respect? Will he take every opportunity to make it plain to the Government of India that, as long as she has not signed up to the treaty, her chances of obtaining a permanent seat on the Security Council are pretty remote?
Will the Foreign Secretary also take advantage of the G8 meeting to make it plain to the French that the European Union troika representations would have been even more effective if the French Government had not conducted tests within the past three years?

Mr. Cook: I am happy to agree with the right hon. and learned Gentleman's last point, although I seem to recall that, when those tests were carried out, it was the party then in opposition which condemned them, not the party in government. On his other points, of course a solution to tensions in the region is the way forward to achieving security in the region. I fear that the recent nuclear tests will make it more difficult, rather than easier, to achieve the meaningful dialogue that is necessary to resolve the outstanding problems.
On the question of the United Nations, to which I alluded in my response to the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), India has ambitions in the international community. Those are reasonable ambitions given India's size, its role in the world and its potential significance on the world stage; but they are ambitions which will be realised only if India now recognises the depth of concern and dismay felt by friends in the international community who would otherwise wish many of those ambitions to prosper.

Ms Jenny Jones: We are all agreed that the geographical siting of the nuclear tests will not improve the relations with Pakistan on the issue of Kashmir, but will my right hon. Friend bear in mind the fact that there is a growing view that it is also likely to increase the internal tension between the Indian Government and the Punjab? That issue, which for a while

looked as though it was going quiet and beginning to be resolved, is now likely to flare up. Will my right hon. Friend bear that in mind when he talks to our high commissioner, because there are many Indians of Punjabi origin in this country who are extremely concerned about the implications of these events?

Mr. Cook: I am happy to respond to my hon. Friend by saying that I fully understand the point to which she refers. Indeed, the recent visit to Amritsar brought home to me not only how large was the Sikh population in India, but the strong connections between it and our domestic population in Britain, which is funding the restoration of the golden temple.
My hon. Friend referred to the most distressing feature of the nuclear tests: there are serious problems of bilateral relations between India and some of its neighbours and serious problems of resolving ethnic tensions within India. It is impossible for even the most friendly outsider to see how the nuclear tests will assist in the resolution of either set of problems.

Mr. David Davis: The Foreign Secretary will be aware that it was the policy not only of this Government, but of the previous Government, specifically to avoid what has happened in the past few days, for reasons cogently stated by the right hon. Member for Manchester, Gorton (Mr. Kaufman) and my right hon. Friend the Member for Bridgwater (Mr. King)—reasons of technological escalation in an area of hair-trigger tension. Does he accept that it is vital that Britain and Europe as a whole go to the maximum extent—including sanctions, but not including withdrawal of aid, which I accept would be an amoral approach—not only to demonstrate to India our disapproval, but to dissuade Pakistan from following suit and to deter other countries on the nuclear threshold from following the Indian example?

Mr. Cook: I fully share the right hon. Gentleman's concern and I am happy to say that we understand that my statement today contains sentiments that would also have been expressed by the previous Administration. It is important that India should recognise the unity of concern over this issue. We shall now be pursuing that unity of view throughout international forums where we can, not only at the G8, but in the ASEAN regional forum, which is to meet soon, in the European Union and, almost certainly, within the Security Council at the United Nations. I hope that those messages, which will be backed up by agreed common positions in many of these forums, will bring home to the Government of India the fact that they have much more to gain from exercising restraint than they can possibly hope to gain from demonstrating nuclear capacity.

Mr. Marsha Singh: Does the Foreign Secretary agree that that fragile Government have taken this irresponsible action partly for reasons of national electoral popularity? If that is so, why should the British taxpayer subsidise that national electoral popularity? Does the Foreign Secretary agree that, unless the international community takes the firmest possible action, it will be a


green light for other countries to test nuclear weapons? If he does agree, should we not lead on sanctions rather than trail behind others?

Mr. Cook: I am not aware of any subsidy that we provide to the Government of India. I have already made clear our position on our aid programme. If that programme is a subsidy to anyone, it is a subsidy to the poorest communities in India.
My hon. Friend raises a very important point of which we should not lose sight. It may be unfortunate, but the reality is that the Indian nuclear tests have been widely and enthusiastically welcomed by large sections of the Indian population. That is why I think that it is very important that, in our conduct of this issue and in order to get the message across, we must demonstrate not just to the Government of India but to their people that the course on which the Government have embarked in this case is damaging to India's national interests and that the interests of the Government of India and their people will be far better achieved by adhering to the comprehensive test ban treaty, by reducing tension and by seeking a reduction in confrontation with neighbouring countries rather than an escalation in the arms race.

Mr. Bowen Wells: May I welcome the measured and responsible response of the Foreign Secretary to these deplorable nuclear tests, and particularly his reassurance to the House that we shall continue with our aid programme in order to assist the poorest people in India? Will he lose absolutely no opportunity of impressing on the Indian Government the sheer uselessness of the nuclear tests and of the arms race that they will inevitably trigger? They will set in motion a line of expenditure that the Indian population and the Indian Government can ill afford, and will thus deny many millions of Indian people the opportunity for good education, good health and inward and domestic investment in their economy.

Mr. Cook: The hon. Gentleman speaks with knowledge of, and commitment to, the development issues. He speaks eloquently about the Indian Government's mistaken priorities. He is absolutely right: it is very difficult to see what possible utility is served by these nuclear tests or any future nuclear weapon that India may acquire as a result of them. Tragically, we all understand only too well the immediate and urgent utility that would be served by improving India's education and hospital systems.

Mr. John McDonnell (Hayes and Harlington): May I take forward the point made by my hon. Friend the Member for Wolverhampton, South-West (Ms Jones) regarding constituents who originate from the Punjab and who have many relatives remaining there? They have expressed concern in recent months about the build-up in that area of not only nuclear weapons but military weapons in general. It is proposed that a sub-continental conference be established to bring together the relevant states in order to discuss non-proliferation and the demilitarisation of the Punjab so that we can secure long-term peace in that area, which has been blighted for so long.

Mr. Cook: My hon. Friend draws attention to a geographic and historic truth regarding the sub-continent: the historical area of the Punjab crosses both states and

both sides have a clear interest in reducing tension between the two states. One unfortunate consequence of the recent nuclear tests and other recent events is that, in the past few years, there had been a very good and welcome development towards regional co-operation and regional forums in the sub-continent. It is very much in the interests of the sub-continent that that path is resumed. At present, India and Pakistan trade only 1 per cent. of their gross domestic products with each other. In the modern world, where prosperity is based primarily on trade, external investment and the exchange of technology, that kind of barrier to trade makes no sense for the prosperity and development of those two countries.

Mr. John Wilkinson: Is there anything in the Foreign Secretary's statement that will prevent India from maintaining the regional strategic advantage that the deplorable test programme has afforded to it? Will there not be a temptation for Pakistan, which we all hope it will resist, to follow suit, unless that regional strategic advantage is redressed? Will the Government, at the very least, deny the granting of any export licences for armaments to India, and follow the American example of a selective trade embargo until the Indian Government sign the comprehensive test ban treaty and the non-proliferation treaty?

Mr. Cook: If the international community decided on any such embargoes, we would, of course, adhere to them and uphold them. We have consistently taken the view that if there is to be an effective embargo in any circumstances, it should not be unilateral—it must be international.
I strongly agree with the hon. Gentleman's earlier point that the tests will have had a destabilising effect elsewhere in the region. It is not at all clear to me that they have conferred an advantage on India. India's nuclear capacity is still clearly inferior to that of China, and, although it has demonstrated a capability, India may not necessarily be that much further ahead in technology than Pakistan. India's interests are not served by seeking an illusory advantage through the nuclear weapons programme. Its interests would be much better served by seeking a reduction in tension and economic co-operation across the sub-continent.

Mr. Dennis Skinner: Does my right hon. Friend agree that the revelation of India's series of tests gives the lie to those who believed that, after the end of the cold war, we could lock the nuclear weapons argument away and throw away the key? The tests are a dangerous development for India, possibly Pakistan and who knows where else.
Is it not worth noting that in a week when there have been two private notice questions from the Tory Opposition relating to a west African country and scraps of paper that never appeared in red boxes, the Opposition have shown their priorities? They did not ask for a private notice question today on this matter.

Mr. Blunt: We did.

Mr. Menzies Campbell: We did.

Mr. Skinner: I know who did. It was left to my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) to do that. That is where the private


notice question came from. Does that not show that when the Sierra Leone tittle-tattle has ended, we will still be dealing with the problem of the nuclear tests?

Mr. Cook: My hon. Friend makes his own point in his own robust way. In my statement, I appealed for a united position on the issue, and I am pleased that the House has managed to sustain a united position. That is an important message to send to the outside world. I understand that my hon. Friend and I will have an excellent opportunity next week to make party political points.

Mr. Michael Fabricant: How confident is the Foreign Secretary that there has been no assistance to India for the missile programme or for its separate nuclear weapons programme from countries in the European Union or, more likely, from individuals from the former Soviet Union, in breach of the nuclear non-proliferation treaty? If the right hon. Gentleman is not entirely confident that India has operated alone, will he raise the matter at the G8 meeting over the weekend?

Mr. Cook: All members of the EU are parties to agreements that oblige us not to provide technology or equipment that could assist with nuclear proliferation. As India is not a party to the non-proliferation treaty, it has been regarded with special care by those who are parties to the those undertakings. I cannot answer for clandestine groups or illicit sales from within the former Soviet Union. That is a matter of legitimate concern and one which the international community has sought to tackle. At the G8 we sought to increase the safeguards against illicit trafficking in nuclear equipment and nuclear weapons material. We must continue to be vigilant and ensure that the international community does not assist development that it finds damaging.

Mr. Harry Barnes: We all understand the dangers of Pakistan retaliating and engaging in its own tests, thus creating tit-for-tat between the two nations and escalating the test problem considerably. From our contacts with Pakistan, how serious is the likelihood of its engaging in tests? Are there views and values coming from within Pakistan that show that different counsels will prevail?

Mr. Cook: I wish that I could speak with confidence about what counsels will prevail in another Government. We have urged restraint on the Pakistan Government and, so far, they have done nothing to retaliate in a way that would be regarded as escalating the tension. We should recognise that the Government of Pakistan are under some pressure from public opinion there. We hope that they will show leadership and maturity on this issue and that they will listen to the international community. If they do so, they will win for themselves great support from within the international community, which will be of much greater value to Pakistan than any nuclear tests have been.

Mr. Keith Simpson: Given the dangers of nuclear escalation, which other hon. Members have pointed out, can the right hon. Gentleman confirm that the Foreign Office was literally surprised by the Indian nuclear tests? If so, what will he do about it for the future?

Mr. Cook: Yes, both we and the United States were surprised at the speed with which these nuclear tests took

place. We are, indeed, concerned at that degree of surprise and we are considering it. The hon. Gentleman will understand full well if I do not outline what we intend to do.

Dr. Lynne Jones: May I add my voice to those who have already expressed the view that our influence on India and other states seeking to acquire weapons technology would be all the greater if we took more convincing steps not only to reduce but to get rid of our own nuclear weapons stockpile, which serves us no useful purpose either? Will my right hon. Friend initiate urgent talks with the Prime Minister and the Secretary of State for Defence to see how we can improve our performance in this area?

Mr. Cook: My hon. Friend makes a point which I know she holds strongly and which many people understand and support. One recognises that argument. I do not believe that if Britain did not possess a nuclear deterrent it would have had a material bearing on the decisions made in Delhi in the past few months. What is important is that we have credibility because we abide by our international commitments against nuclear tests and uphold the regime of non-proliferation. If we do so, we have every right to say to the Government of India, as a respected friend and partner, that they should do likewise.

Mr. Nigel Beard: Does my right hon. Friend agree that, although these events are universally to be regretted, they also give urgency to the steps to strengthen international confidence in the nuclear non-proliferation treaty? Will he consider steps, therefore, to restart the stalled processes of mutual nuclear disarmament between the western powers and Russia?

Mr. Cook: I am happy to tell my hon. Friend that this was an issue on which we called for progress when the G8 Foreign Ministers met last weekend. I entirely agree with my hon. Friend that if we can get that process back on track and achieve success there, it will create a rather different climate in which non-nuclear weapon states may consider whether to proceed to proliferation. Tragically, at present they may be more immediately influenced by the nuclear tests that have just occurred. That is why we are right to convey a strong, united message of opposition, concern and dismay that a friend such as India should have taken this step.

Mr. Piara S. Khabra: I generally support the sentiments expressed about the nuclear tests in India, but mention has been made of Punjab and of Kashmir. My hon. Friends the Members for Wolverhampton, South-West (Ms Jones), for Bradford, West (Mr. Singh) and for Hayes and Harlington (Mr. McDonnell) expressed views with which I do not agree. I was born and educated in Punjab, and I know the situation there.
The partition of India took place in 1947, and the problem in Kashmir is the legacy of British imperialism. I often go to Punjab. I accompanied my right hon. Friend the Foreign Secretary on a visit at the end of 1996; he went to Kashmir to study the problem for himself. Will my right hon. Friend say that this country has no intention of interfering in the internal affairs of another country? There has been terrorism, which is being supported across


the border. The Conservative party and the Labour party are committed to rooting out terrorism wherever it exists in the world, and we have been doing that in Northern Ireland. This country is committed to fight against terrorism.
Will my right hon. Friend say that this country will never interfere in the internal affairs of another independent, democratic, secular country?

Mr. Cook: My hon. Friend speaks with feeling and personal knowledge. I assure him that we have no intention of interfering in internal affairs. We have repeatedly stressed that issues such as Kashmir are primarily for the parties concerned to resolve among themselves. If we can in any way help them to find a solution, we are ready to do so, if called on to do so. In expressing the views that we have, we are not in any way interfering in what is solely an internal affair for India. The tragedy of the nuclear tests is that they will have profound external effects, which is why they are a legitimate matter of concern for the international community.

Mr. Gordon Prentice: May I stay on the issue of Kashmir? My right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) was absolutely right that Kashmir could be the flashpoint for a nuclear war in the region. Given that the issue of Kashmir has been festering unresolved for half a century and that United Nations resolutions passed in the 1940s have never been acted on, would it help if the UN were to revisit the issue and consider a new resolution with fresh legitimacy that could bring the warring parties—Pakistan and India—to the negotiating table?

Mr. Cook: My hon. Friend is right to draw attention to the tension within Kashmir and the extent to which that could provide a particularly dangerous environment for India to press ahead with a nuclear weapons programme.
I am not necessarily sure that the UN can usefully play a role at present; if we were to return to it for a fresh resolution, there would be grave difficulty in crafting a resolution that would be acceptable. I am not necessarily

sure that the end product would be more acceptable to my hon. Friend than the resolutions that are on the table of the Security Council. It is inevitable that, as a result of the nuclear tests, the UN Security Council will have to address the issue of the tests and of the sub-continent and will almost certainly adopt a presidential statement on it.
I am not sure that it is necessarily in India's interest that it should involve the UN once again in the affairs of the sub-continent. India would much better serve its objectives if it were to ensure that, by adhering to international norms and to the comprehensive test ban treaty, it demonstrated that it was interested in finding a solution rather than escalating tension.

Mr. Howard: You will know, Madam Speaker, how false was the premise on which the intervention of the hon. Member for Bolsover (Mr. Skinner) was based.
On a point of substance, given that there has been a good deal of consensus in the House about the undesirability of taking action to withdraw aid from India, will the Foreign Secretary share with us the Government's view on the desirability or otherwise of imposing other sanctions? He has told us about the importance of establishing consensus in the European Union, the G8 and the United Nations. We understand that, but presumably the Government will not approach those talks with no view of their own. Will he share with the House what their view is on this vital question?

Mr. Cook: Most of the countries to which the right hon. and learned Gentleman referred have, as an economic measure, suspended their aid programmes. We do not intend to take that course. In fairness to those countries, I should point out that their aid programmes are much more modest than ours, so they are better able than we are to use that as political pressure. A suspension of our aid programme would have a substantial impact.
We hold the presidency of the G8 and are consulting at official level with the other countries of the group to find a point of consensus. I do not resile from the point made by the right hon. and learned Gentleman. When the G8 meets, we shall have to take action to back up the strong condemnation.

Business of the House

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): With permission, I wish to make a statement on the business for next week.
MONDAY 18 MAY—Opposition Day (11th allotted day).
Until about 7 pm, there will be a debate on Sierra Leone, followed by a debate on the Territorial Army. Both debates will arise on Opposition motions.
TUESDAY 19 MAY—Conclusion of remaining stages of the Scotland Bill.
WEDNESDAY 20 MAY—Until 2 pm, there will be debates on the motion for the Adjournment of the House, which will include the usual three-hour pre-recess debate.
Consideration in Committee of the Human Rights Bill [Lords] (first day).
THURSDAY 21 MAY—Debate on the common agricultural policy on a Government motion. Details will be given in the Official Report.
The provisional business for the first week back after the Whitsun recess will be as follows.
MONDAY 1 JUNE—Remaining stages of the National Lottery Bill [Lords].
Remaining stages of the Late Payment of Commercial Debts (Interest) Bill [Lords].
TUESDAY 2 JUNE—Opposition Day (12th allotted day).
There will be a debate on an Opposition motion, subject to be announced.
WEDNESDAY 3 JUNE—Until 2 pm, there will be debates on the motion for the Adjournment of the House.
Consideration in Committee of the Human Rights Bill [Lords] (second day).
THURSDAY 4 JUNE—Until about 7 pm, Second Reading of the Registration of Political Parties Bill.
Debate and motions on modernisation of the House of Commons.
FRIDAY 5 JUNE—Debate on a motion for the Adjournment of the House on a subject to be announced.
The House will also wish to know that on Wednesday 20 May, there will be a debate on fisheries monitoring under the common fisheries policy in European Standing Committee A.
Details of the relevant documents will be given in the Official Report.
[Wednesday 20 May:
European Standing Committee A—Relevant European Community document: 6123/98, Fisheries Monitoring under the Common Fisheries Policy. Relevant European Legislation Committee report: HC 155-xxii (1997–98).
Thursday 21 May:
Floor of the House—Relevant European Community document: 7073/98, Agenda 2000: Reform of the Common Agricultural Policy. Relevant European Legislation Committee report: HC 155-xxvi (1997–98). The Second Report from the Agriculture Committee, Session 1997/98,

"CAP Reform: Agenda 2000" (House of Commons Paper No. 311) and the Government response thereto (House of Commons Paper No. 719).]

Sir Patrick Cormack: I thank the right hon. Lady for giving us the business for next week and the provisional business for the week after. May I thank her on behalf of my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) and of the Opposition as a whole for her efforts to accommodate us on the timing of the Modernisation Committee debate? She will appreciate that we shall want to study the long-promised and long-delayed Registration of Political Parties Bill.
May I revert to a subject that has often been raised in recent weeks? With the Foreign Secretary sitting by her side, will the right hon. Lady ensure that we have a full debate on foreign affairs before the end of our presidency of the European Union? She referred to that matter last week, and we have pressed for such a debate over many weeks. It is crucial that it is held before our presidency comes to an end.
We have chosen Sierra Leone as the subject for the first of the debates on Monday. In the light of Sir John Kerr's evidence to the Select Committee on Foreign Affairs this morning, which made it plain that the Minister of State, Foreign and Commonwealth Office, the hon. Member for Manchester, Central (Mr. Lloyd), was fully briefed before the famous Adjournment debate on 12 March, may we hope that the Foreign Secretary—who will no doubt hear what she says—will apologise for the confusion that his statements have caused? When the Foreign Secretary speaks in the debate on Monday, will he give a detailed and precise answer to all the questions that have recently been put to him by my right hon. and learned Friend the shadow Foreign Secretary?
We all hope that the referendum a week today in Northern Ireland will produce an affirmative result. The right hon. Lady knows that the Government have the official Opposition's complete support in that regard. On the assumption that the referendum goes the right way, will she give us some idea when the legislation consequent on that referendum will be presented?
Will the right hon. Lady also arrange for two statements of clarification to be made in the week after the Whitsun recess? May we have a statement on the Government's accommodation or agreement—call it what you will—with the trade unions on recognition? May we also know when we will be told precisely the level of the minimum wage? After yet another Question Time with the President of the Board of Trade this afternoon, we are none the wiser. When will we be informed?

Mr. Dennis Skinner: It is £5.

Sir Patrick Cormack: The hon. Gentleman suggests that it is £5. Perhaps the right hon. Lady will confirm that, as the hon. Gentleman seems to know, and obviously has a hotline to all sorts of people.
Will the Leader of the House confirm that the state of the legislative timetable is such that the Government are likely to keep the House sitting into August?

Mrs. Taylor: I am glad that we have been able to accommodate the request to change the day of the debate on modernisation. It will be convenient if the shadow


Leader of the House can be present, not only because of her position, but because she is a member of the Select Committee on the Modernisation of the House of Commons.
I made it clear last week that we intend to have a debate on European matters before the end of our presidency, and before the summit. I echo that commitment today.
As far as Monday's debate is concerned, I hope that the hon. Member for South Staffordshire (Sir P. Cormack) is fully up to date with what has been said following the hearing held this morning by the Select Committee on Foreign Affairs. I hope that he has seen the letter from Sir John Kerr to the Chairman of the Committee, which clarifies further Sir John's statements to the Committee today. When hon. Members have had time to study that letter, they may feel that the situation is clearer. The letter confirms that the briefing prepared for my hon. Friend the Minister of State for use in the debate on 12 March did not mention arms shipments, and did not say that one such report had already been passed to Customs and Excise. I think that Opposition Members should study that clarification with care before they take part in Monday's debate.
The hon. Gentleman asked whether the Foreign Secretary will answer all the questions that have been asked of him: of course he will. I hope that, during the debate, Opposition Members will acknowledge the difference between allegations and facts; otherwise, I am not sure how useful the debate will be.
On Northern Ireland, we welcome the complete support that the hon. Gentleman offered on behalf of the Opposition. He asked me to be specific about the time scale for consequential legislation, but I do not think that I can be. This side of the referendum, it would not be helpful to make immediate judgments about what should happen on the other side.
The hon. Gentleman requested statements on trade union recognition and the minimum wage. We shall decide about statements in the normal way, and no date has yet been established for publication of the White Paper to which he referred. Any statements will be announced to Conservative Members in the usual way. We look forward to further confirmation that the Opposition have changed their views on the minimum wage and are coming round to accepting it.
On the legislative programme, recesses always depend on the progress of business.

Ms Margaret Moran: At 6 o'clock on Friday morning, I took part in a drugs bust with Luton police as part of Operation Eagle, the national endeavour to tackle drug peddling and drug-related crime. Is my right hon. Friend aware that, in parts of Luton and, I am sure, throughout the country, drug peddling and packaging has become a cottage industry involving women and children? Will she join me in commending Luton police for their activities as part of Operation Eagle and allow time in the House for a full debate on the implications of the drug problem in Luton and throughout the country?

Mrs. Taylor: My hon. Friend speaks from personal experience, having seen the drug problem in her constituency. Many hon. Members share her concern about the impact of drug taking on local communities—on the individuals who take drugs and on victims of

crime, which is often a consequence of people needing money to fund drug habits. We had a brief debate on drugs on Wednesday morning and we recently published the Government's strategy and made a statement in the House. I said at the time that it might be possible to have a more general debate on drugs once the strategy was under way and I still bear that possibility in mind.

Mr. Paul Tyler: May I congratulate the Leader of the House on keeping a straight face in responding to the request from the Conservative Front-Bench spokesman for debates on an ethical foreign policy? I look forward to Monday, and pigs might fly.
On Sierra Leone, will the right hon. Lady address two particular points and pass them on—I see that the Minister of State, Foreign and Commonwealth Office, the hon. Member for Manchester, Central (Mr. Lloyd) is beside her—so that they can be addressed on Monday? First, is there not an urgent need to clarify the present procedures on arms sales? She may be aware that, in addition to the evidence to which she has referred, during this morning's Select Committee the Permanent Under-Secretary at the Foreign and Commonwealth Office betrayed complete ignorance of the very existence of the interdepartmental restricted enforcement unit, which was responsible for initiating the Customs and Excise investigation in this case. If the Permanent Under-Secretary was not aware even that it existed, that suggests that there is a need for some clarification of the roles in the Foreign Office, quite apart from the other issues that have already been referred to.
Secondly, please may we have a statement on Monday on the Government's intentions in relation to improving the procedures? The Minister of State will recall that, in the debate on 2 April, my hon. and learned Friend the Member for North-East Fife (Mr. Campbell) made some specific requests for information on improvements, but we have yet to receive an answer from the Minister of State, despite, the Leader of the House will recall, my reminding her of it last week. I hope that the Government will recognise that, to avoid a repetition of these events, we must have effective parliamentary scrutiny that operates on the same basis as the Intelligence and Security Committee and a register of arms sales.
In considering those issues, will the Leader of the House and, indeed, the Minister of State, Foreign and Commonwealth Office look at the answers that have been given today to my hon. Friend the Member for Somerton and Frome (Mr. Heath) about arms sales to Indonesia? It is extraordinary that, this morning, the Foreign Secretary saw fit to make a statement—apparently without being asked—on the "Today" programme, yet has not come to the House to give an explanation. Is it not true that the Government still follow too slavishly the procedures of their predecessors in these matters?

Mrs. Taylor: On the last point, we are certainly not following slavishly the procedures of our predecessors. In fact, new guidelines were established last July and are being followed.
On the issues that the hon. Gentleman raises on Sierra Leone, he is anticipating the debate next Monday, perhaps in case he is not called. I am sure that all the issues that are particularly relevant to Sierra Leone will be answered during that debate.

Mr. Andrew Mackinlay: Will the Leader of the House consider the fact that on the streets it is being


said that the proposed White Paper on industrial relations and trade union reform will be published next Friday, when the House will not be sitting? I urge my right hon. Friend to tell the appropriate Minister that that would be bad form because not only should such a major White Paper be published while the House is sitting, but there is the prospect, with Madam Speaker's permission, of having a statement, which is important for such major legislation. Indeed, that would give us the opportunity to proclaim the merits and virtues of trade unionism, as well as to probe in detail whether the threshold will be set by the Bill or by statutory instrument, which would cause concern among some of my hon. Friends.

Mrs. Taylor: I caution my hon. Friend against believing everything that is said on the street. As I said a few minutes ago, statements will be made in the usual way when it is convenient for the House and right in the Government's view. We will not give further notice of when statements will be made, and my hon. Friend will have to wait patiently for a little longer.

Mr. Eric Forth: May we have a debate in the near future about communication techniques in the Foreign and Commonwealth Office, strictly on the basis of open government? The Leader of the House surely agrees that the country as a whole, not least Members of the House, must now be told who is told what, when and on what basis in the Foreign and Commonwealth Office, simply so that we have a template against which to judge the twists, turns, changes of story and different versions that have emanated from the Foreign and Commonwealth Office recently, and so that they will not be repeated.

Mrs. Taylor: There is not even a template of the allegations—they seem to change every other minute.

Mr. Jim Cousins: May I remind my right hon. Friend that I had cause a few weeks ago to ask her whether she proposed to call a Standing Committee of the English regions, which has not met for 20 years? She told me that there was no demand for such a Committee, and I believe that some of my hon. Friends from the north and north-east have subsequently spoken to her about it. Has she had the opportunity to reconsider the matter? Does she propose to call the Committee, in the light of my hon. Friends' concern about resources and representation? May I assure her that we shall continue to press this matter, whatever the outcome on Saturday?

Mrs. Taylor: I enjoyed the reference to Saturday, when I shall watch developments with great interest. I have not been inundated with requests to re-establish a Standing Committee of the English regions. It is true that one of my hon. Friends has mentioned that issue. I am not inviting lobbying, but although I do not sense a great desire for such a Committee, I have not closed my mind to the suggestion.

Mr. Edward Garnier: On the basis of progress being made in Committee, when does the Leader of the House expect the Report stage of the Data

Protection Bill to take place? Secondly, how many more days will she allow for the Committee stage on the Floor of the House of the Human Rights Bill? She has kindly announced so far that there will be two days. I remind her that, some weeks ago, she promised to write to me about the commencement date of the Human Rights Bill—will she please do so?

Mrs. Taylor: I shall certainly follow up the hon. and learned Gentleman's last point. On the Data Protection Bill, I find it difficult to give two weeks' advance warning of business, so I am afraid that I cannot anticipate when we might have the remaining stages of that Bill. The hon. and learned Gentleman will be aware that there is a great deal of legislation to be slotted in and sometimes changes are made late in the day. Discussions are continuing through the usual channels about how we should deal with the Human Rights Bill and how much time it will require.

Mr. Barry Gardiner: My right hon. Friend will recall that, at the end of last year, the Government undertook to introduce this spring a consultation document on leasehold reform. In the light of a letter that I recently received from our hon. Friend the Minister for Local Government and Housing, which suggested that the consultation document may not be with us until after 25 June, and although we all appreciate that global warming has played havoc with the seasons, when does my right hon. Friend expect spring to finish this year?

Mrs. Taylor: My hon. Friend asks his question in a novel way, but I am afraid that I can give him only a straightforward answer. The Department has recently produced a series of consultative documents, and of necessity some have had to take priority. I cannot give him a specific date. If he applied for an Adjournment debate to air his views on what should be in the consultation document and what the outcome should be, he could take his chance with other hon. Members.

Dr. Liam Fox: May I, first, hope that the Leader of the House ensures that several copies of Sir John Kerr's letter are made, as letters have a habit of getting lost in the Foreign Office these days?
May we have a debate on the structure and function of government? Yesterday, during Prime Minister's Question Time, the Prime Minister said:
the priority for the Government is my priority and my prerogative."—[Official Report, 13 May 1998; Vol. 312, c. 368.]
Such a debate might give us an idea of the residual role of the Cabinet.

Mrs. Taylor: I do not see any problem with that definition. The Prime Minister has always been first among equals.

Mr. Graham Brady: Is the Leader of the House aware of the unfortunate practice among some hon. Members of advertising their party affiliation on House of Commons headed notepaper alongside their name and, sometimes, their constituency? Does she agree that that is contrary to the spirit of the representative nature of our democracy, in which we all represent all our constituents regardless of party? Will she


reflect on whether the Modernisation Committee should guide Members that such a practice is not welcome and might be discouraged in future?

Mrs. Taylor: That is not exactly a matter for me. The misuse of headed notepaper is a matter for the House authorities. I have seen the notepaper of hon. Members of all political parties headed in such a way. Perhaps the hon. Gentleman is afraid of putting the word "Conservative" on his notepaper.

Mr. John Bercow: Further to the request of my hon. Friend the shadow deputy Leader of the House, will the right hon. Lady reconsider and find time as a matter of urgency for a statement on the Government's position on trade union recognition? That position is of very wide interest—even if not to the solitary representative of the Liberal Democrats in the House this afternoon, the hon. Member for North Cornwall (Mr. Tyler). Is the right hon. Lady aware that the Secretary of State for Education and Employment told reporters last June that the Government's proposals would be announced by the President of the Board of Trade in autumn 1997? Seven months later, we have not had that statement. Is that not because there is a war in the Government between the advocates of modernisation and the trade union lackeys and recipients of trade union sponsorship?

Mrs. Taylor: I should expect nothing less from the hon. Gentleman. I made the position clear earlier. There will be a White Paper, and I am not going to say anything about timing.

Mr. David Prior: On 6 and 12 May, the Foreign Secretary said in the House that, when the Minister of State, Foreign and Commonwealth Office, the hon. Member for Manchester, Central (Mr. Lloyd), made his statement in the House on 12 March, he was unaware of any Customs and Excise investigation into arms sales to Sierra Leone. In view of Sir John Kerr's comments in the Select Committee today and the further confusion caused by the subsequent letter, which none of us has yet seen, is not it important that the House has the chance to hear a clear statement from the Foreign Secretary as soon as possible?

Mrs. Taylor: There is no conflict at all. The letter to which I referred from Sir John Kerr, the Permanent Under-Secretary of State at the Foreign and Commonwealth Office, says very clearly that my hon. Friend the Minister of State was not told about the Customs and Excise inquiry. I do not think that we can be clearer than that.

Mr. Dennis Skinner: Is the White Paper being held up because the Government have been waiting for the result of the referendum on the mayor of London? If that is correct, and since only 34 per cent. of people turned out in that poll and probably only about 24 per cent. voted yes, does that mean that the figure of 24 per cent. will be inserted in that new document?

Mrs. Taylor: My hon. Friend should know better than to tempt me to say anything about the contents of any White Paper. All I can say is that it will be a very positive document that I think will be very widely welcomed.

Points of Order

Mr. Graham Brady: On a point of order, Madam Speaker. During business questions, I raised what I regard a serious point, which hon. Members should take seriously. In the light of the Leader of the House's unhelpful response—which was flippant and party political, unlike the nature of my question—and her suggestion that the matter was for the House authorities, I would welcome any guidance from you on how it might be taken forward. It is important that all constituents receiving communications from Members of Parliament know that their Member represents their views and not merely party views.

Madam Speaker: I see very little notepaper from Members of Parliament; they usually telephone my office and ask to see me immediately, if not sooner. I have not had the privilege of seeing what is on their notepaper, but I shall make a point of looking. If anything, this is a matter for the Administration Committee, and I shall ask it to consider the point.

Mr. Alan Clark: On a point of order, Madam Speaker. Is it not a convention in this place that when a Minister has misled the House—accidentally or deliberately—he is obliged at the very earliest opportunity to make a personal statement? It would be perfectly proper and natural for the House to draw the inference from the evidence given by the Permanent Under-Secretary in the Select Committee this morning that, in fact, either the Secretary of State for Foreign Affairs or his Minister of State has misled the House—inadvertently or deliberately. The only thing that appears to have been offered—it is most unsatisfactory—is the text of an alleged letter, which has been read out to the House but is not available for us to look at. Surely you, Madam Speaker, would think it preferable that one or other of those Ministers should, if he is to rely on that letter, make a personal statement to clear up the position.

Madam Speaker: The right hon. Gentleman perhaps was not in the House a few days ago when a point of order was put to me along those lines and when I made it quite clear that, if a Minister, however inadvertently, has misled a Committee, it is a matter for that Committee and that Minister. If any corrections were to be made, they would have to be made in that Committee.

Mr. Clark: Further to that point of order, Madam Speaker.

Madam Speaker: I can take it no further. This is the second time that I have dealt with a point of order on the matter. The ruling is very clear: it is a matter between the Minister and the Committee.

Mr. Eric Forth: On a point of order, Madam Speaker. Will you clarify the status of a document—in this case a letter—from which the Leader of the House has freely quoted but none of the rest of the House has seen? This is a matter of some contention, as you have just indicated. Will you clarify such a


document's status—should it exist—and say when the House can expect to have sight of it and therefore be able to deal further with the matter?

Madam Speaker: The Committee can, and I hope will, put the letter in the Library as soon as possible so that it is in the public domain. I have not seen it, but I think that that is the best procedure at this time.

Mr. Clark: Further to that point of order, Madam Speaker.

Madam Speaker: No.

The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): Further to that point of order, Madam Speaker. I confirm what I said before on the record: my statement in the House on 12 March was an exact statement of my knowledge at the time. If, given the events of time, I need to correct that, I shall of course seek to do so before the House. At that time, I was not briefed, told, advised or in any way informed either orally or in writing of alleged arms shipments or of the Customs and Excise inquiry. I would add for the sake of completeness, and in accordance with your advice to the House, Madam Speaker, that I wrote, as I undertook to do, to the Chairman of the Select Committee correcting the record of my appearance before the Committee. I think that in so doing I discharged my obligations not only to you, Madam Speaker, and to the House but to the people of this country.

Mr. Michael Howard: On a point of order, Madam Speaker—it arises directly out of the point of order raised by the Minister. Two points arise. First, the confusion that exists about the briefing that the Minister had available to him before his appearance in the House on 12 March can easily be resolved; that briefing can be made available without delay and in full to the House, and I ask for that to be done.
Secondly, the Minister of State has just said that what he told the House on 12 March was—I think I quote his words precisely—"an exact" description of his state of

"knowledge at the time". The report that I have seen of Sir John Kerr's letter—I have not seen the letter itself—records that the briefing contained a reference to a possible deal between Sandline and President Kabbah.
The Hansard report of the Minister's speech to the House on that occasion does not, so far as I have been able to check, contain any reference to such a possible deal. It would therefore appear that what the Minister has just told the House on a point of order is itself inaccurate. May we therefore please have a full statement that will put those confusions and contradictory statements to rest without further delay?

Madam Speaker: As the right hon. and learned Gentleman is aware, those are, quite rightly, matters for argument and debate between the Government and the Opposition. They are matters of policy; they are not at this stage matters for the Chair. I hope that perhaps on Monday many of the matters that the right hon. and learned Gentleman finds outstanding will be cleared up. I am sure that at that stage questions will be put by the Opposition in the hope that things may be clarified better than, in the mind of the right hon. and learned Gentleman, they have been at this stage.

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): Further to that point of order, Madam Speaker. As some Members are now in the Chamber who were not here a few moments ago, I remind the House that the letter that we were talking about earlier was from the Permanent Under-Secretary of State, Sir John Kerr, to the Chairman of the Foreign Affairs Select Committee. That letter said clearly that my hon. Friend the Minister of State had not been told about the Customs and Excise investigation. May I suggest that although the letter is probably technically in the ownership of the Select Committee, it may assist the House if, with the permission of the Chairman of that Committee, a copy were placed in the Library?

Madam Speaker: That is the way to proceed. Perhaps the right hon. Lady would follow that through and see that a copy is available there.

Orders of the Day — Tax Credits (Initial Expenditure) Bill

Considered in Committee.

[MR. MICHAEL J. MARTIN in the Chair]

Clause 1

AUTHORISATION OF EXPENDITURE

Mr. Michael Fallon: I beg to move amendment No. 4, in page 1, line 6, after 'expenditure', insert
`up to a limit of £20 million'.

The First Deputy Chairman of Ways and Means (Mr. Michael J. Martin): With this, it will be convenient to discuss amendment No. 8, in page 2, line 3, at end insert—
'(5) Any expenditure incurred under this section shall be separately accounted in the Commissioners' Annual Report to Parliament.'.

Mr. Fallon: Last Thursday, the House gave the Bill a Second Reading, but not without serious reservations. Those reservations were expressed from the Opposition Front Bench, from the Opposition Back Benches and from the Liberal Democrat Benches. Essentially, they concerned the lack of any connection between the Bill and the subsequent major legislation that it purports to introduce, the lack of accountability, the Bill's failure to specify expenditure, and the broad nature of the power being given to the Secretary of State for Social Security and the commissioners of the Inland Revenue.
The amendments are the first in a series that attempts to tidy up the Bill. Amendment No. 4 would introduce into the legislation a limit on the expenditure sought. The explanatory and financial memorandum makes it clear that the expenditure for which the Government seek authority should amount to about £15 million to £20 million. The Government are introducing the legislation because they have no authority to spend money for those purposes under existing votes.
However, we find no reference to the money itself, or to any limit, in the Bill. We think it right that there should be a limit. Indeed, the amendment was inspired by the Financial Secretary to the Treasury herself when she challenged us about whether we thought more or less money would be needed—on Second Reading there was much talk about fancy computers and the like. She said:
We are confident that we have asked the House for the money that we need to develop this proposal".—[Official Report, 7 May 1998; Vol. 311, c. 889.]
However, the Bill asks for unlimited expenditure, so it is important to put an upper limit into it. I am prepared for the Financial Secretary to say that £20 million is a bit tight, that she ought to have some leeway and that she ought to be able to come back to the House in future—that she should be allowed initial expenditure up to one level, but with the ability to come back and change it. However, I hope that the hon. Lady will accept that there

should at least be some limit. The limit that we propose is that specified in the explanatory and financial memorandum—£20 million.
Amendment No. 8 insists that the money spent under the Bill should be separately and properly accounted for. Essentially, the Bill asks for a new vote and a new line of public expenditure, and we would like to see that expenditure separately accounted for in the normal accounts presented to Parliament by the commissioners. Perhaps the Financial Secretary will say straight away that that is what will happen, and that the money will be so accounted for. However, given the unlimited nature both of the discretion sought under the Bill and of the expenditure possible under that heading, it would be preferable to have that fact written into the statute.

Mr. Eric Forth: I echo and strongly support what my hon. Friend the Member for Sevenoaks (Mr. Fallon) has said. To my regret, I come to the debate without having been able to participate in the earlier stages of proceedings on the Bill, and I am truly staggered by its nature—by its lack of any sort of framework or limitation. Surely what my hon. Friend suggests is not only reasonable, but would be expected by any taxpayer who was considering what Parliament is doing today.
One has only to look at the original text of the Bill to see that it represents a blank cheque. It contains not one but several phrases along the lines of
the Secretary of State and the Commissioners
may
incur such expenditure as they think appropriate",
and so on. The phraseology makes no attempt to circumscribe the areas of responsibility or to limit the expenditure.
One would have thought that, whether this is a preparatory, a speculative or a paving measure, or whatever one might call it, as a matter of responsibility and accountability to the taxpayer, there would be indications at this stage of the kind of limit that we could expect. The Bill does the exact opposite, and goes to extraordinary lengths to allow unlimited expenditure on unspecified activities that, in the opinion of certain people—albeit important and responsible people—should be undertaken. In coming to Parliament and asking for such an approach, the Government are chancing their arm to an unacceptable extent.
We are the custodians of the tax revenues of the people of this country. The Government come to the House of Commons from time to time to ask for moneys—sometimes very large sums—for specified purposes. However, this is a different matter altogether; we are in new territory. The Government are saying, "Trust us. We are not going to tell you what is going on here, but we would like the House of Commons to authorise us to spend any amount of money to pursue unspecified objectives." That strikes me as unacceptable. The amendments provide terms of reference against which the Government can be judged.
My hon. Friend the Member for Sevenoaks said that if the amount that he was suggesting in the amendment was unreasonable, he would consider a different amount—even a higher amount—providing the Minister was able to give an explanation of what the money would be used


for. We have nothing to go on; the Bill does not tell us. Surely the Minister must have some idea in her head as to what is intended. There must be a plan or specification within each of the Departments involved. Surely the Government cannot be coming here and asking for an unlimited amount of money to do something that they would like to do.

5 pm

The Financial Secretary to the Treasury (Dawn Primarolo): Did the right hon. Gentleman ask these questions when the Government of which he was a member put through paving legislation during their period in office?

Mr. Forth: Regrettably, I was not in a position to do so because I was incarcerated in the Government. I would have found it difficult, within the terms of collective responsibility, to have queried—especially on the Floor of the House—what the Government were doing. I may have harboured my inner thoughts on the matter; that is different. From my lowly position in the foothills of the Government, I may from time to time have thought that my colleagues were chancing their arm. But our roles are now reversed; no wonder the Financial Secretary looks so happy and I look so downright miserable.
We are dealing now with the Tax Credits (Initial Expenditure) Bill which the Government have proposed with completely unspecified demands contained within it. My hon. Friend the Member for Sevenoaks made a reasonable offer. If the Financial Secretary could demonstrate that the £20 million limitation that my hon. Friend was suggesting was not appropriate, he would be prepared to look at it again. That is a generous offer, but I hope that my hon. Friend has made it on the condition that the Financial Secretary is prepared to give a more detailed account of the activities she has in mind which involve the expenditure proposed by the Bill.
Amendment No. 8 seeks a reasonable and responsible requirement—separate accounting in the commissioners' annual report to Parliament. Two separate Government Departments are involved, and surely we should be told after the event—if we are not to be told before—what has happened in detail. This is a point of accountability. This is the classic role of the House of Commons—to undertake to look in detail at the Government's request to the taxpayer, and to express its view.
I am grateful to my hon. Friend the Member for Sevenoaks for giving the lead in the scrutiny process so that we may hear much more detail from the Financial Secretary. I look forward to her explanation, and we will judge on that basis whether we should press this and other amendments as we seek accountability.

Mr. Damian Green: It is important to set the amendments in context; they do not seek to stop the Government doing anything they wish to do. These are in no way wrecking amendments. My hon. Friend the Member for Sevenoaks (Mr. Fallon) has made it clear that we accept the principle of using tax credits rather than benefits if that is seen to be a better way in which to achieve the policy aim. However, there are important principles at stake, and the amendments would improve

the Bill and the process of moving towards the working families tax credit. We welcome the principle, but it is important for the Committee to address the question why the Bill would be improved if a specific limit were imposed on the amount of money that can be spent.
Clearly, the amendments would be good for this House. I am a new Member of Parliament, still adjusting to life in this place. I may be forgiven for returning to first principles, and for asking why I am here, why all of us are here and what is the purpose of the House. As my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) made clear, one of the basic purposes of the House is to ensure that the taxpayers' money which the Government extract from all of us is not only spent well and responsibly, but is spent transparently. Ministers must not give themselves powers to spend indefinite amounts on purposes that may or may not be clear. The route to imposing the will of the Commons and to fulfilling that basic function of the House is surely to have as much detail as possible on new areas of expenditure that the Government may be planning.
The amendments would also be good for the Treasury. The Financial Secretary knows better than most that if any spending Department came along with proposals for paving Bills that allowed Ministers to do more or less what they liked without any attempt to control public expenditure, the first people to jump down their throats—before the Opposition parties in Parliament—would be her officials and, one assumes, Treasury Ministers.
It is in the interests of the Treasury that it can demonstrate to the rest of Whitehall that it is not saying, "Do as we say, not as we do." The Treasury should set an example to the rest of Whitehall, and should legislate responsibly to ensure that it allows for as much control and scrutiny of public expenditure as possible. That applies particularly to amendment No. 8, which would make the amount of public expenditure devoted to the matter transparent. The amendment is in the interests of the Treasury and is in line with the Government's alleged policy of increasingly open government. I hope that the Financial Secretary welcomes it.
I hope that no Treasury Minister would ever even think—let alone say at the Dispatch Box—that we are dealing with only £20 million, and that that sum is not particularly serious. One is reminded of a former distinguished Chancellor, Lord Howe, who said that, when talking about public expenditure, people tended to say that there was a billion here and a billion there, but that when the figures were added up, one was soon talking about real money. I would hope that Treasury Ministers would be even more fine-grained than that, and would think that even £20 million—although it is only a drop in the ocean of public expenditure—was a serious amount of money. Therefore, not to have control over it would be a bad thing.
The Bill is like the famous prospectus for the south sea bubble—a proposal was on offer to do things later about which no details could be given at the time. The Bill allows Revenue commissioners to spend sums of money that are not defined on projects that are ill defined. It is not good legislation, so I urge the Financial Secretary to accept the amendments.

Dawn Primarolo: The comments of Conservative Members revolved round misunderstandings of parliamentary procedure—they showed what short


memories some hon. Members have. The right hon. Gentleman with the flashy tie—I cannot remember his constituency—

Mr. Forth: Bromley and Chislehurst.

Dawn Primarolo: The right hon. Member for Bromley and Chislehurst (Mr. Forth) at least had the good grace to acknowledge that he did not pay sufficient attention to paving Bills introduced by the Conservative Government—he does not understand what such Bills are supposed to achieve. Another misunderstanding concerned whether there was control over expenditure.
I cannot accept amendments Nos. 4 and 8. Amendment No. 4 would cap the preparatory expenditure that can be incurred, and amendment No. 8 would require the Inland Revenue alone to report the money that it expends under the Bill. I say, with respect, that the amendments are misguided; they add nothing to the Bill.
I remind the Committee that a paving Bill is needed to enable the Inland Revenue and the Department of Social Security to begin to spend money on preparations for the introduction of the tax credits that were announced in the Budget. On Second Reading, I detected considerable agreement on the importance of those preparations, which would enable proper consultation on the Government's policy so that the substantive Bill covered the areas that hon. Members would expect it to.
The Inland Revenue is not authorised to spend money on preparations because the tax credits represent a completely new area for it. The Department of Social Security is not authorised to spend money because the tax credit will eventually be administered by the Inland Revenue—the tax credit does not belong to it, so to speak.
We need a paving Bill because there is a gap in the two Departments' authority to do the work on the substantive legislation—we need to close that gap. As I explained on Second Reading last week, we cannot afford to wait to begin that work. It is important that tax credits are introduced according to the timetable that we announced, so that people can benefit from them as soon as possible. The paving Bill fills the gap and—Conservative Members mentioned accountability—properly brings the matter before Parliament for its approval.
The introduction of such a paving Bill is the right way in which to deal with the unusual situation that we face. The Bill follows the usual procedures, as can be demonstrated by reference to paving Bills introduced by the previous Conservative Government, which related to privatisations—the broad principle was brought before Parliament for endorsement, and the details were brought forward subsequently. Then as now, the paving Bill enabled work to begin on the broad concept because, then as now, there would otherwise be no authority to begin the work.
Conservative Members seem to suggest that the Government are trying to pull a fast one on Parliament. That is absolutely not the case, as past practice, the debate on Second Reading and the information that the Government have made available show. What Conservative Members have said speaks volumes about the previous Government's attitude to Parliament. The Labour Government's attitude is different, and I have fully explained why the Bill is necessary.

Mr. Forth: I hope that the Financial Secretary does not think that we are objecting to the principle of paving

measures. Our objection is that there is no limit on the expenditure—we believe that it would not be unreasonable to impose such a limit—and that the Bill contains scant information on the way in which the moneys may be spent. Those are the two lacunae—we are not challenging the principle of paving legislation.

The First Deputy Chairman: This is an appropriate moment for me to remind the Committee that we should not have Second Reading debates. We are talking about amendments Nos. 4 and 8, which deal with a limit—hon. Members must address their comments to the amendments and to nothing else.

Dawn Primarolo: Thank you, Mr. Martin. The right hon. Gentleman fails to understand that the Bill will not relinquish the proper financial controls on expenditure that apply to all Departments. Departments look for best value for money in all their spending. There is no question of incurring expenditure earlier than necessary.
The purpose of the Bill is to enable the most cost-effective preparations to be made; the Bill is not a licence to spend money. The estimates of costs in the explanatory and financial memorandum are, by necessity, tentative. They give Parliament an idea of the money that the two Departments may need to spend on the preparatory work between Royal Assent to this Bill and enactment of the substantive Bill, which we intend to introduce as soon in the next Session as the legislative timetable permits.
I tell the Committee in all honesty that we cannot say with certainty how soon we shall be able to introduce the substantive Bill, nor can we predict how long it will take before the measures of that Bill become law. The financial estimates are designed to take account of that uncertainty, but—I have never tried to conceal this from hon. Members—they are, finally, only estimates.
A cap on the total allowance is not the way in which to reduce the risk of money being wasted, if that is, indeed, the intention of the amendment. Perhaps Conservative Members' concern is to improve the control of spending by ensuring that no more than £20 million can be spent on the preparatory work, but the amendment would not do that either. There is nothing to be gained from Departments squandering money on matters that will not receive parliamentary approval, but everything to be gained from beginning the preparatory work that will enable the scheme not only to be implemented as early as possible, but to operate effectively.
On amendment No. 8, I ask why the Opposition want only one of the Departments to account specifically for expenditure. If they are concerned that there should be tighter financial controls on the expenditure, I must point out that all the expenditure of both Departments is tightly controlled—the Departments are scrutinised by the National Audit Office and, ultimately, by Parliament through the Public Accounts Committee, as hon. Members are well aware. It is not the case that there will be no accountability for the expenditure unless such accountability is specifically required in the Bill.
If Conservative Members are concerned about the potential waste should the detail of the scheme finally approved by Parliament differ from the assumptions made in the preparatory work, the amendments will not help.


I ask the Committee to reject them on the basis that accountability is in place through the normal parliamentary processes. All public money is accountable, and the National Audit Office and the Public Accounts Committee are the watchdogs to ensure that it is.
Estimates provided in the Bill were intended to be helpful and not to be a cap. If Conservative Members want progress on the matter, given the safeguards that they know are in place, they will allow this paving Bill to go through, in the same way as they facilitated their own paving Bills when their party was in office.

Mr. Quentin Davies: That explanation is far from satisfactory. The Financial Secretary does not need to explain to us what a paving Bill is; we all know that, and we have said that, in principle, we are not against such Bills. I am not sure that the hon. Lady has recognised that a paving Bill represents a considerable risk to the taxpayer because, should Parliament decide not to proceed with the substantive reform of working families tax credit—we shall have other opportunities to debate the merits of that—the £15 million to £20 million spent on setting up the systems will be lost and will not be recoverable by the taxpayer. That is an extremely good reason for having a limit, which is exactly why my right hon. and hon. Friends tabled the amendment.
The Treasury continues to be committed to cash limits, which the Conservative party introduced in government. If it is possible for the Treasury to have a cash limit on the entire expenditure of the Department for Education and Employment, the national health service or the Ministry of Defence, how come it is not possible to have a cash limit on one particular project that involves setting up systems and hiring and firing people to operate a potential working families tax credit?
The Financial Secretary avoided that issue altogether, and as a result, there is no way that we can withdraw the amendment. We will not press it to a vote, but we will not withdraw it: we will leave it to her either to accept it or to reject it, and to stand the consequences of so doing.
Amendment negatived.

Mr. Fallon: I beg to move amendment No. 1, in page 1, line 6, leave out
'in doing anything which in his or their opinion is appropriate.'.
The Bill gives the Secretary of State and the commissioners the most extraordinarily wide discretion. We have already established that the Bill is extremely widely drafted. There is no limit on the expenditure that can be undertaken under it, now that amendment No. 4 has been negatived. There is no restriction on the changes to the two benefits that we were initially told the Bill concerned; in fact, the Bill is not confined to those: as Liberal Democrat Members pointed out last week, it could be used for the transfer of any benefit into an income tax credit.
Above all, as we shall see when we get to amendments Nos. 2 and 10, there is no link between the paving Bill and subsequent legislation, so we must ensure that expenditure authorised under this Bill is properly based on its aims, which should be properly and objectively defined within it.
According to subsection (1),
The Secretary of State and the Commissioners … may incur expenditure
not simply for the purpose of facilitating the listed matters but
in doing anything which in his or their opinion is appropriate
for such facilitation. In other words, the test is purely subjective. Almost anything could be classified as facilitating the changes and could have money spent on it.
Last Thursday, the Financial Secretary gave us a glimpse of some of the purposes to which the money may be put—this may strike a chord with my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth)—and said that the Government might want to spend some on
the advertising that might be necessary".
We know exactly how thin that line could be, with the deluge of brochures, pamphlets and publicity material that are used to promote the Government's policies.

Dawn Primarolo: rose—

Mr. Fallon: I seem to have struck a raw nerve.

Dawn Primarolo: The hon. Gentleman has not struck a raw nerve. I am trying to assist him so that he does not mislead the Committee. In fact, it was the Chairman of the Social Security Committee, the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who asked me to clarify that point, and I told him that I was talking not about advertising the working families tax credit but about investigating how we could ensure maximum take-up. The record will show that that is what I said.

Mr. Fallon: I have the record to hand. The Financial Secretary specifically said:
The expenditure that is requested in the paving Bill is to cover the costs … It covers, mainly, information technology changes; the provision to the public of information about the new tax credits; the advertising that might be necessary".—[Official Report, 7 May 1998; Vol. 311, c. 889.]
We are getting into the Foreign and Commonwealth Office school of ministerial answers.
The plain fact is that subsection (1) has been far too loosely drafted. If the expenditure is appropriate for facilitation, it should be appropriate objectively, as specified in the legislation, and not determined simply by the opinion of the Secretary of State or the commissioners.

Dawn Primarolo: I have the record in front of me. I said:
If I have given that impression, I am grateful to the hon. Gentleman for pointing it out. I was speaking about the development work to ensure proper take-up."—[Official Report, 7 May 1998; Vol. 311, c. 889.]
That is a clear answer, on the record. Conservative Members do not want to oppose the working families tax credit, because they know how popular the concept is and how important the development work will be. That was especially clear from the points that they made about businesses on Second Reading. They try to misquote and twist what is said, and I hope that the record is now correct and that the hon. Member for Sevenoaks (Mr. Fallon) will acknowledge the fact.
I do not need to repeat the purpose of the Bill, but we need to point out again to Conservative Members—they have amazingly short memories—that accountabilities are imposed on Departments to ensure the proper scrutiny of the spending of taxpayers' money. Opposition Members want to give the impression that there will be a pot of money that Departments dip into without any check, but they know full well that both Departments need to spend the money to develop the working families tax credit and that the paving Bill does not affect the controls on that expenditure.
Both Departments will be accountable for the money that they spend on the project in the same way as they are normally accountable, to their permanent secretaries and to the chief accounting officer. The National Audit Office and the Public Accounts Committee are also there to scrutinise expenditure. There is no need for the amendment.
If the hon. Member for Sevenoaks is so keen to ensure the smooth introduction of the working families tax credit, both for those who will receive it and to ensure that business is properly consulted and the bureaucracy kept to a minimum, he should withdraw the amendment.

Mr. Fallon: That is not a particularly encouraging answer, but in view of the need to get on to the other amendments, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Mr. Quentin Davies: I beg to move amendment No. 7, in page 1, line 15, at end insert—
'(e) an assessment of the compliance costs involved in (c) and (d).'.
The amendment provides for an assessment to be made of the compliance costs involved in the whole exercise—not merely the paving exercise but the working families tax credit exercise—which should be assessed as part of the preparations in the coming months. That is enormously important, because the public and businesses have not yet appreciated that the new working families tax credit, which is to be administered by the Inland Revenue rather than the Benefits Agency, will in fact be run by businesses, which will bear the real costs. This is one burden in the never-ending list of burdens that the new Labour Government are imposing on business, whether deliberately or simply out of negligence—or sheer ignorance of how businesses are run and the problems that such administrative and bureaucratic impositions can create for business, and small businesses in particular. We face the prospect of new trade union regulation, minimum wage legislation and a whole range of new burdens on businesses. The Bill will impose one more fairly major burden.
5.30 pm
As everyone knows, businesses in this country already bear the bulk of the administrative costs of running the income tax system. Under PAYE, which is administered by employers, the Inland Revenue has to do little other than receive a series of cheques. All the administrative work, deductions from salaries and so forth are done by employers, and that is a great burden on them. Over the years, they have had to face it and have put in the systems to cope. Employers, particularly small employers, complain very much about that, and rightly so.
The Bill will place a whole new burden on businesses, comparable to that placed on them by the introduction of PAYE but much greater. It will not merely double the burden that businesses have to carry as tax collectors for the state, but be a multiplication of that burden. It will impose a greater burden, first, because many details will have to be recorded that businesses did not have to bother about before.
I am sure that the Financial Secretary is about to tell the Committee that the Benefits Agency will make the assessment then inform employers how the tax coding must be changed for the individual. The fact is, however, that people's family circumstances will now be relevant to the amount of money deducted from or added to their wages in the form of working families tax credit, so a range of factors that have not been taken into account in the calculation of tax codes will have to be considered. Since there will be more factors, there will also be more changes. More computer entries will be required and employers will need more complicated systems with more complicated software to cope. Things will go wrong, and there will be greater administrative and managerial burdens and problems to be resolved. That is a considerable charge on business, particularly small businesses.

Mr. Forth: I hope that I am not anticipating my hon. Friend's point—if I am, I look forward to his clarification—but I am anxious that the amendment is too permissive and not sufficiently mandatory. Clause 1 states that
any of the following things
may be done, and lists them (a) to (d). The amendment adds (e), which is
an assessment of the compliance costs involved",
but as I understand it that assessment will not be required. Does my hon. Friend think that the amendment is strong enough in that regard?

Mr. Davies: My right hon. Friend has a strong point. When the substantive Bill is before us, he might like to table a stronger amendment. We are showing how reasonable the Conservative Opposition are. We are starting the discussion of the concept of working families tax credit positively, making tentative suggestions and trying to be as helpful as we can to the Government. My right hon. Friend does not believe in a softly, softly approach when dealing with the Labour party, and I dare say that experience will prove him right, but we are starting the Parliament with a relatively softly, softly approach. I can assure him that, if it does not work, we shall return to the harder line that he suggests.
Small businesses have not yet focused on the burden on employers. When they do, it will be a nightmare prospect. What is more, the Bill will open up a new dimension in the relationship between employers and employees. Even if employees do not directly have to inform employers of a change in family circumstances—divorce, marriage, children, the people with whom they live or with whom they cease to live—those details will be available to employers, because they will be evident from the change in the tax codes that the Benefits Agency provides.
Finally and most significantly, an enormous potential compliance cost is involved on which we must have assurances from the Government this afternoon. At the


moment, net pay is less than gross pay. If an employee is paid £200 a week in gross pay, some of it will be paid to the national insurance fund and to the Inland Revenue through PAYE, and the balance will go directly to the employee. With the working families tax credit, in certain cases net pay will be more than gross pay, so the employer will have to pay out more than the salary or wage of the employee in question, and the difference will presumably be refunded subsequently by the Benefits Agency. That will create a significant cash flow cost for employers as well as a considerable financing burden.
I have two questions for the Financial Secretary. First, by what measures will she compensate employers for that cost? I take it that they will be able to charge the Benefits Agency interest, which should fully compensate them for their financing costs. I also take it that that will not be less than the working capital cost that the employer pays when borrowing money from the bank, as that would be totally unfair and a new tax on employers.
Secondly, what will be the position of employers who have already reached their borrowing limit with the bank? The requirement imposed by the Government through this measure, which is essentially for additional working capital, may push them through the limit and cause severe cash flow constraints, which might undermine the viability of the business. What assurances can the hon. Lady give the Committee on those matters? They are of the greatest economic importance and importance to businesses, as well as to employees, as the most perverse result of the measure might be, as I am sure she would agree, to reduce employment and create a major deterrent to employers to take on people who are, or look as though they are likely to be, the beneficiaries of working families tax credit.

Dawn Primarolo: I like the hon. Member for Grantham and Stamford (Mr. Davies)—I sincerely hope that that does not damage his political future—

Mr. Forth: Yes, it does.

Dawn Primarolo: I am sorry. It is a shame that the hon. Member for Grantham and Stamford did not read the Second Reading debate before he commented on cash flow, burdens on employers and the need to keep compliance costs to the minimum, which were points made by his hon. Friend the Member for Sevenoaks (Mr. Fallon) in that debate. I realise that I am not allowed to repeat the arguments and will merely refer the hon. Gentleman to columns 886 and 887 of the Second Reading debate, which deal with compliance costs, working with employers and the need to keep those costs low.
On cash flow, I pointed out to the House that procedures are in place to deal with a similar situation to the one that the hon. Gentleman described in respect of statutory sick pay and maternity pay. Part of the reason for the paving Bill to start consultation, particularly with employers, is to find whether similar procedures would be appropriate for tax credits, and how best they should be administered. The measure deals with exactly the points raised by the hon. Member for Grantham and Stamford on the involvement of business and whether there are extra compliance costs.
The right hon. Member for Bromley and Chislehurst (Mr. Forth) got it in one when he mentioned the problem with the amendment and gave the reason why I am going to ask the Committee to reject it. It gives us powers to incur the expenditure but does not oblige us to undertake a compliance cost assessment. That is clearly not what the hon. Member for Grantham and Stamford intended. It is therefore defective and does not achieve its objectives.
The project team of the Inland Revenue and the Department of Social Security has already met representatives of the business community, and will regularly meet and consult them, to ensure that we minimise employer compliance costs. That has to be a major part of our discussions with employer groups, payroll organisations and others. When the Bill to introduce working families tax credit comes before the House, hon. Members would expect discussions on compliance to be part of the debate. I ask the Committee to reject the amendment—first, because it is defective and does not achieve what its mover said he wanted it to; and, secondly, because what it is intended to achieve will be done anyway. No amendment is necessary

Mr. Fallon: I am disappointed and hurt that I did not receive a sign of affection similar to that conveyed by the Financial Secretary to my hon. Friend the Member for Grantham and Stamford (Mr. Davies). I see that I shall have to work harder whether in this Committee or in that to which we shall shortly return upstairs.
This was a mild amendment, as the Financial Secretary said. It would not make the compliance costs mandatory but it would at least introduce them into the Bill and ensure that they were discretionary. She keeps saying that she intends to minimise the overall cost to employers, but she gave us no idea of the extent to which she recognised the cash flow problems of businesses, in addition to the administrative problems.
As my hon. Friend the Member for Grantham and Stamford said, in many companies, the net pay of employees who receive the credit will be higher than their gross pay. The first payment will have to be made at least 19 days before the other payment. There will be a negative cash flow impact on business and a positive one on the Treasury. I think that there is a case for compensating employers who have to live with that cash flow impact. It is certainly a matter to which we shall return when the major legislation comes before the House. In the meantime, because of the Financial Secretary's failure to recognise the additional burden on business, I am not minded to withdraw the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 119, Noes 227.

Division No. 276]
[5.43 pm


AYES


Ainsworth, Peter (E Surrey)
Brazier, Julian


Allan, Richard
Browning, Mrs Angela


Ancram, Rt Hon Michael
Bruce, Ian (S Dorset)


Arbuthnot, James
Bruce, Malcolm (Gordon)


Baldry, Tony
Burnett, John


Bercow, John
Burns, Simon


Beresford, Sir Paul
Burstow, Paul


Blunt, Crispin
Butterfill, John


Boswell, Tim
Cable, Dr Vincent


Bottomley, Peter (Worthing W)
Chapman, Sir Sydney (Chipping Barnet)


Brady, Graham







Chope, Christopher
Laing, Mrs Eleanor


Clappison, James
Lait, Mrs Jacqui


Clark, Rt Hon Alan (Kensington)
Letwin, Oliver


Clifton-Brown, Geoffrey
Lidington, David


Collins, Tim
Lilley, Rt Hon Peter


Cormack, Sir Patrick
Lloyd, Rt Hon Sir Peter (Fareham)


Cotter, Brian
Loughton, Tim


Cran, James
Luff, Peter


Curry, Rt Hon David
MacGregor, Rt Hon John


Davey, Edward (Kingston)
McIntosh, Miss Anne


Davies, Quentin (Grantham)
Maclean, Rt Hon David


Davis, Rt Hon David (Haltemprice)
McLoughlin, Patrick


Day, Stephen
Malins, Humfrey


Duncan, Alan
Maples, John


Duncan Smith, Iain
Moss, Malcolm


Emery, Rt Hon 4Sir Peter
Norman, Archie


Evans, Nigel
Ottaway, Richard


Fabricant, Michael
Pickles, Eric


Fallon, Michael
Prior, David


Forth, Rt Hon Eric
Randall, John


Foster, Don (Bath)
Redwood, Rt Hon John


Fox, Dr Liam
Rendel, David


Fraser, Christopher
Robathan, Andrew


Garnier, Edward
Robertson, Laurence (Tewk'b'ry)


Gibb, Nick
Ruffley, David


Gillan, Mrs Cheryl
Russell, Bob (Colchester)


Goodlad, Rt Hon Sir Alastair
St Aubyn, Nick


Gorman, Mrs Teresa
Sanders, Adrian


Gray, James
Sayeed, Jonathan


Green, Damian
Simpson, Keith (Mid-Norfolk)


Greenway, John
Smith, Sir Robert (W Ab'd'ns)



Spicer, Sir Michael


Grieve, Dominic
Stanley, Rt Hon Sir John


Hamilton, Rt Hon Sir Archie
Steen, Anthony


Hammond, Philip
Streeter, Gary


Hancock, Mike
Swayne, Desmond


Harvey, Nick
Syms, Robert


Hawkins, Nick
Taylor, Ian (Esher & Walton)


Hayes, John
Tredinnick, David


Heald, Oliver
Trend, Michael


Heathcoat-Amory, Rt Hon David
Tyrie, Andrew


Horam, John
Welsh, Andrew


Howard, Rt Hon Michael
Whittingdale, John


Howarth, Gerald (Aldershot)
Wilkinson, John


Hughes, Simon (Southwark N)
Willis, Phil


Hunter, Andrew
Woodward, Shaun


Jack, Rt Hon Michael
Yeo, Tim


Jackson, Robert (Wantage)
Young, Rt Hon Sir George


Johnson Smith, Rt Hon Sir Geoffrey




Tellers for the Ayes:


King, Rt Hon Tom (Bridgwater)
Mr. Nigel Waterson and


Kirkbride, Miss Julie
Sir David Madel.


NOES


Ainsworth, Robert (Cov'try NE)
Burden, Richard


Alexander, Douglas
Burgon, Colin


Allen, Graham
Butler, Mrs Christine


Anderson, Donald (Swansea E)
Byers, Stephen


Armstrong, Ms Hilary
Campbell, Alan (Tynemouth)


Ashton, Joe
Campbell, Mrs Anne (C'bridge)


Atherton, Ms Candy
Caplin, Ivor


Atkins, Charlotte
Casale, Roger


Barnes, Harry
Chapman, Ben (WirralS)


Battle, John
Chaytor, David


Beard, Nigel
Clapham, Michael


Beckett, Rt Hon Mrs Margaret
Clark, Rt Hon Dr David (S Shields)


Bennett, Andrew F
Clark, Paul (Gillingham)


Berry, Roger
Clarke, Charles (Norwich S)


Best, Harold
Clarke, Tony (Northampton S)


Betts, Clive
Clelland, David


Blizzard, Bob
Clwyd, Ann


Boateng, Paul
Coffey, Ms Ann


Bradley, Keith (Withington)
Cohen, Harry


Bradshaw, Ben
Coleman, Iain


Brinton, Mrs Helen
Colman, Tony


Buck, Ms Karen
Cook, Frank (Stockton N)





Cooper, Yvette
King, Ms Oona (Bethnal Green)


Corbett, Robin
Kingham, Ms Tess


Corbyn, Jeremy
Laxton, Bob


Cranston, Ross
Leslie, Christopher


Crausby, David
Levitt, Tom


Cryer, Mrs Ann (Keighley)
Lewis, Terry (Worsley)


Cryer, John (Hornchurch)
Linton, Martin


Cunningham, Jim (Cov'try S)
Livingstone, Ken


Dalyell, Tam
Lock, David


Darting, Rt Hon Alistair
Love, Andrew


Davey, Valerie (Bristol W)
McAvoy, Thomas


Davies, Geraint (Croydon C)
McCabe, Steve


Dean, Mrs Janet
McCartney, Ian (Makerfield)


Denham, John
McDonagh, Sbbhain


Dismore, Andrew
Macdonald, Calum


Dobbin, Jim
McDonnell, John


Dobson, Rt Hon Frank
McIsaac, Shona


Doran, Frank
Mackinlay, Andrew


Dowd, Jim
McNulty, Tony


Drew, David
McWalter, Tony


Eagle, Angela (Wallasey)
McWilliam, John


Eagle, Maria (L'pool Garston)
Mahon, Mrs Alice


Edwards, Huw
Mallaber, Judy


Ellman, Mrs Louise
Marshall, David (Shettleston)


Ennis, Jeff
Marshall, Jim (Leicester S)


Field, Rt Hon Frank
Meacher, Rt Hon Michael


Fisher, Mark
Meale, Alan


Fitzpatrick, Jim
Merron, Gillian


Fitzsimons, Lorna
Michael, Alun


Follett, Barbara
Michie, Bill (Shef'ld Heeley)


Galloway, George
Milburn, Alan


Gapes, Mike
Miller, Andrew


Gardiner, Barry
Moffatt, Laura


George, Bruce (Walsall S)
Moran, Ms Margaret


Gerrard, Neil
Morley, Elliot


Gibson, Dr Ian
Mudie, George


Gilroy, Mrs Linda
Mullin, Chris


Godsiff, Roger
Norris, Dan


Goggins, Paul
O'Brien, Mike (N Warks)


Golding, Mrs Llin
O'Hara, Eddie


Gordon, Mrs Eileen
Organ, Mrs Diana


Grant, Bernie
Palmer, Dr Nick


Griffiths, Jane (Reading E)
Pearson, Ian


Hall, Mike (Weaver Vale)
Pendry, Tom


Hall, Patrick (Bedford)
Perham, Ms Linda


Hamilton, Fabian (Leeds NE)
Pickthall, Colin


Healey, John
Pike, Peter L


Henderson, Ivan (Harwich)
Pope, Greg


Heppell, John
Pound, Stephen


Hesford, Stephen
Prentice, Ms Bridget (Lewisham E)


Hewitt, Ms Patricia
Prentice, Gordon (Pendle)


Hill, Keith
Primarolo, Dawn


Hodge, Ms Margaret
Prosser, Gwyn


Hope, Phil
Purchase, Ken


Hopkins, Kelvin
Rammell, Bill


Howarth, Alan (Newport E)
Rapson, Syd


Howarth, George (Knowsley N)
Reed, Andrew (Loughborough)


Howells, Dr Kim
Robinson, Geoffrey (Cov'try NW)


Hughes, Ms Bevertey (Stretford)
Rooker, Jeff


Hurst, Alan
Ross, Ernie (Dundee W)


Hutton, John
Ruddock, Ms Joan


Iddon, Dr Brian
Russell, Ms Christine (Chester)


Illsley, Eric
Ryan, Ms Joan


Jackson, Helen (Hillsborough)
Sawford, Phil


Jamieson, David
Sedgemore, Brian


Jenkins, Brian
Shaw, Jonathan


Johnson, Alan (Hull W & Hessle)
Sheldon, Rt Hon Robert


Jones, Ms Jenny (Wolverh'ton SW)
Simpson, Alan (Nottingham S)



Singh, Marsha


Jones, Dr Lynne (Selly Oak)
Skinner, Dennis


Jowell, Ms Tessa
Smith, Rt Hon Andrew (Oxford E)


Kaufman, Rt Hon Gerald
Smith, Angela (Basildon)


Keeble, Ms Sally
Smith, Miss Geraldine (Morecambe & Lunesdale)


Kennedy, Jane (Wavertree)



Khabra, Piara S
Smith, John (Glamorgan)


King, Andy (Rugby & Kenilworth)
Soley, Clive






Southworth, Ms Helen
Vaz, Keith


Stevenson, George
Vis, Dr Rudi


Stewart, David (Inverness E)
Walley, Ms Joan


Stewart, Ian (Eccles)
Ward, Ms Claire


Stinchcombe, Paul
Wareing, Robert N


Strang, Rt Hon Dr Gavin
Watts, David


Stringer, Graham
White, Brian


Stuart, Ms Gisela
Whitehead, Dr Alan


Sutcliffe, Gerry
Wicks, Malcolm


Taylor, Rt Hon Mrs Ann (Dewsbury)
Williams, Alan W (E Carmarthen)



Wood, Mike


Taylor, David (NW Leics)
Woolas, Phil


Thomas, Gareth R (Harrow W)
Wright, Anthony D (Gt Yarmouth)


Timms, Stephen
Wright, Dr Tony (Cannock)


Tipping, Paddy
Wyatt, Derek


Todd, Mark



Touhig, Don
Tellers for the Noes:


Truswell, Paul
Janet Anderson and


Twigg, Stephen (Enfield)
Mr. Kevin Hughes.

Question accordingly negatived.

Mr. Fallon: I beg to move amendment No. 2, in page 1, leave out lines 17 and 18.

The First Deputy Chairman: With this, it will be convenient to discuss amendment No. 10, in page 1, line 20, at end insert—
'(2A) Subsection (1) above shall apply to expenditure on any of the things there mentioned for a period of twelve months after this Act comes into force, but shall not apply thereafter in respect of any of those things unless a Bill giving, or purporting to give, approval to that thing has been read a second time in the House of Commons.'.

Mr. Fallon: With this last group of amendments, we address the serious issue of the lack of a relationship between the Bill and the legislation it presages. We have been told time and again that the Bill is a paving Bill, yet there is nothing in it to link it to any subsequent legislation. Indeed, clause 1(2)(a) specifically states that the powers in the Bill
shall be exercisable whether or not Parliament has given any approval
to the changes that are being introduced. That means that all the expenditure and administrative effort could be undertaken, but the changes themselves—the replacement of benefits with tax credits—could be postponed or even cancelled.
That is an extraordinary provision. Presumably, it has been put in the Bill to remove any doubt about whether the powers need to be linked to any subsequent legislation. Amendment No. 2 would delete that provision, and amendment No. 10 would introduce the link that is necessary to ensure that the Government can spend money on preparation, get on with consulting business and install the equipment that will be needed, but that, sooner or later—we suggest slightly sooner—the subsequent legislation must be presented to the House.
Amendment No. 10 has been reasonably carefully drafted to ensure that the Government can at least get going and spend some of the money without having to wait for the subsequent legislation to be passed—indeed, they do not even have to depend on that legislation being passed—but that they have to present to the House and obtain Second Reading for a Bill to establish and give statutory authority to the various changes described in subsection (1). That is essential. Otherwise,

the Government could spend millions, even billions, of pounds on a particular course and decide in the end not to make the changes. If this is a paving Bill, it should be linked properly to the legislation that will follow it.

Mr. Forth: I am grateful to my hon. Friend the Member for Sevenoaks (Mr. Fallon) for drawing this matter to the attention of the Committee. When I first saw clause 1(2)(a), I could not believe my eyes. Any purportedly serious legislation that states:
The powers … shall be exercisable whether or not Parliament has given any approval on which any of the things there mentioned depends
makes one pause for thought—to put it mildly. I shall say this for the paragraph—and these are my only words of welcome for it: it is absolutely consonant with the spirit of the rest of the Bill. As Opposition Members said earlier, it contains no detail whatsoever and is a catalogue of blank cheques, unconstrained powers, and unidentified aims and objectives. However, in the context of the parliamentary process, subsection (2)(a) is perhaps the most worrying aspect.
6 pm
That brings us back to what we said when discussing a previous amendment. As my hon. Friends have noted, we are reasonably content with the broad objectives of the Bill—there is no dispute about that. However, those objectives are stated in the broadest possible manner and contain no detail at all. That makes things difficult for responsible Members of Parliament on the Government or Opposition sides. I am delighted to see that one distinguished Government Back Bencher has joined the debate—I hope that we shall hear from the hon. Member for Bethnal Green and Bow (Ms King) shortly. I apologise, as I can see another Government Back Bencher. I think that I see two Labour Members packing the Chamber—

The First Deputy Chairman: Order. I shall not allow the right hon. Gentleman to get away with that. He should speak to the amendment and not refer at length to who is in the Chamber. He is in the Chamber; I am in the Chamber; and I am listening to him.

Mr. Forth: We make a great double act, Mr. Martin, and I am grateful for that.
The Bill lacks any details that provide a reference point for Members of Parliament—whether numerous or not—to scrutinise, question and hold the Government to account. The more vague the Bill and the less detail it contains, the more difficult it becomes to promote accountability, which is primarily the responsibility of the official Opposition. Subsection (2)(a) goes further than that by seeking to extend the powers in clause 1 and becoming completely open-ended and unspecified.
That is why I welcome the amendment, which seeks to remove subsection (2)(a) altogether. I hope that the Minister will explain why it was deemed necessary to include that provision in the Bill. I cannot for the life of me guess what the justification could be. At the very least, the Minister owes us a comprehensive explanation of the necessity of the provision and why it has been drafted in a way that arouses our suspicions. If the Government wanted to take the Opposition with them, one would think


that they would frame measures in such a way as to provide some reassurance. However, the Government seem to be doing the opposite. Bills that are drafted in this way cause unease and suspicion among hon. Members, which is most regrettable. I hope that the amendment will lead to a full explanation, if nothing else.
That brings me to the second amendment that my hon. Friend introduced so ably. There is a risk that I may part company from him here. If I am reading the amendment correctly—this is also how I interpreted his explanation—it suggests that a mere Second Reading of subsequent legislation would provide a trigger for expenditure. I am not sure what was in my hon. Friend's mind when he drafted the amendment, but that strikes me as being a rather unusual approach, and I am not too happy with it. It is at odds with the argument that I am making—a fact of which I am rather conscious, so I shall point that out before anyone else does.
I find myself in the unusual position of having difficulty understanding why my hon. Friend has included that provision in his amendment. It is somewhat at odds—I invite my hon. Friend to correct me if I am wrong—with the argument that I am making about detail and accountability. If my hon. Friend is saying that a mere Second Reading would enable further expenditure to take place without Parliament knowing the details of that expenditure, my fear is that it would lead to a lack of accountability, and I am arguing that the Bill should be more accountable.
If the amendments are put to the vote, I might ask for them to be put separately. I shall be able to support whole-heartedly my hon. Friend's first amendment, which hits the nail on the head. Regrettably, unless I hear from my hon. Friend the Member for Sevenoaks or my hon. Friend the Member for Grantham and Stamford (Mr. Davies), I am reluctant to support amendment No. 10 at this stage because I fear that it is at odds with the thrust of my argument this afternoon.

Mr. Malcolm Bruce: I rise briefly to echo the concerns expressed about subsection (2)(a). I agree with the right hon. Member for Bromley and Chislehurst (Mr. Forth) that the phrase that appears in the Bill is quite extraordinary. I suppose that it is bold to include such an expression in legislation, because basically it says, "Please give us an unspecified amount for an unspecified time to do something that may not subsequently receive the approval of Parliament". My hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood), in his capacity as Chairman of the Social Security Select Committee, referred specifically to that on Second Reading.
While I do not have the same reservations as some Conservative Members about the Bill's ultimate objective, all hon. Members recognise that, although the working families tax credit and connecting benefit with the wage packet as a reward for work are good ideas, there are many difficulties associated with the measure that the Government have been unable to explain to the Committee. It is fair for the Government to say that they must make preparations. I do not object to a Bill that says that the Government must make preparations in order to provide information that will ultimately form the basis of more substantial expenditure. However, that is a little difficult to take when the Government will not define the

time scale or the amount that they propose to spend or make the measure in any way conditional on Parliament's approving the subsequent legislation.
Some people may believe that this is an academic argument—they will look at the Government's majority and say, "They have a majority, so what is the problem?" There are two problems. The first involves a fundamental principle: either the House operates as a democratic Chamber or it does not. Whatever the size of a Government's majority, they should not presume that all their legislation will be passed. Secondly—and more to the point—the Government may find that although there is much support for the principle behind their plans, the detail is substantially different.
In those circumstances, I believe that it is not unreasonable for the Committee to apply some defining framework to this legislation. I understand the concerns expressed by the right hon. Member for Bromley and Chislehurst. I suspect that he does not want one penny to be spent on preparations: he views amendment No. 10 as effectively sanctioning that expenditure and simply putting a time limit on it. I have no problem with that. As I recall, my hon. Friend the Member for Roxburgh and Berwickshire was concerned about the haste with which the Bill was being introduced, and suggested that more detail should be in evidence before we give the Government a blank cheque.
For those reasons, and not because I oppose the Government's aims, I consider the amendments pertinent. I hope that the Financial Secretary will recognise that there is genuine concern that we are being asked to approve a measure which might go out of control. I am sure that she will understand that if she or any other Minister has to tell the House in a year's time that the Government have spent £40 million and still do not have the answers, the record of today's debate will be quoted back at them.

Mr. Green: I am grateful to follow two such distinguished and experienced parliamentarians. Their remarks have removed one of the doubts in my mind. When I read the words covered by amendment No. 2, I was puzzled about what they meant. As a new Member, I could not understand how a Government could, even in a paving Bill, claim powers that would be exercisable whether or not Parliament has given approval. I attributed that to my own inexperience, but I now know that others more experienced than I am find the proposal extraordinary.
How could the powers be exercisable if Parliament did not approve the measures designed to follow this paving Bill and bring in the tax credit system? I hope that the Financial Secretary will explain that. On Second Reading, it was pointed out that the powers that the Government are taking under the Bill could be spread to almost any part of the benefits system. One suspects that that is the intention—the Government are introducing a way of allowing greater power to be exercised to change the balance between benefits and tax credits, without returning to the House.
Apart from the arguments in principle that were deployed by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) and the hon. Member for Gordon (Mr. Bruce), there is a practical objection. Any legislation that allows such latitude to a Government must be suspect. One of the possible


side-effects of the Bill is that the tax credit could have a significant effect on the public spending figures and particularly the public borrowing figures.
As the money is transferred from public expenditure to tax credits, there will be an effect on some of the most important macro-economic statistics, which—not to put too fine a point on it—will look better, even though, in reality, nothing will have changed. If the Government are giving themselves the power to do that over a wide front, one would have to be naive to assume that that power would not be extremely tempting for a Government who had run into trouble with their public borrowing.
The Government already have form in terms of attempting to take powers without proper respect for parliamentary scrutiny. It is therefore understandable that many Opposition Members are suspicious. Bagehot famously divided the constitution into the efficient and the dignified parts. I sometimes think that the Government have invented a third category—the inefficient part of the British constitution. They regard the House of Commons as inefficient because it can stand in the way of administrative fiat. That is what the Government dislike, but, as that is the purpose of Parliament, we must assert the powers of House at every opportunity, as amendment No. 2 does.
I agree with my right hon. Friend the Member for Bromley and Chislehurst that amendment No. 10 does not sit easily in a group with amendment No. 2, as it approaches the problem in a different way. Amendment No. 10 can be considered a backstop. If the Government are not minded to accept amendment No. 2, which would remove the problem caused by the clause as drafted, amendment No. 10 would give the House a chance to return to the matter after a year and take a view on whether the Government should be allowed to proceed as they intend.

Mr. Forth: Does my hon. Friend agree that even if a Bill were given a Second Reading, we could not be certain whether it sanctioned a particular level of expenditure, as that might come out only later, in Committee? Does my hon. Friend see the danger in that?

Mr. Green: I agree; that is important. If I had to choose between the amendments, I prefer amendment No. 2. Amendment No. 10 would be acceptable, though less good.
The hon. Member for Gordon said that the argument may seem academic, but there are practical implications. We already know that the Government's legislative timetable for the year is in trouble. They are holding over the House the nuclear threat of sitting into August. It is not inconceivable that legislation planned for the next Session may not emerge in the Queen's Speech—

The First Deputy Chairman: Order. The hon. Gentleman is going far too wide of the amendment.

Mr. Green: I am grateful for that guidance, Mr. Martin.
The 12-month rule in amendment No. 10 may be practically relevant, even if the amendment is inadequately drafted, as it may well be more than 12 months before the legislation that will follow this paving Bill emerges.
The argument would be important even if it were simply academic, because of the principle of enforcing proper parliamentary procedure and scrutiny, but it may have a practical point. The overall point illustrated by the amendments is that in a peculiar way, this is a paving Bill that does not pave. If nothing happens afterwards, the Bill proceeds anyway. One of the effects of the amendments, especially amendment No. 2, would be to make it a proper paving Bill. Something must follow it for the Bill to have effect. For those reasons, I support the amendments.

Dawn Primarolo: I remind the Committee that the Government are publicly committed to introducing the new tax credits from October 1999. The paving Bill is the first step in ensuring that that will happen. As I said with regard to all the amendments and on Second Reading, the purpose of the Bill is to enable the two Departments to begin the necessary preparatory work now, in order to meet that timetable. I have also said that the substantive legislation will be presented to enable us to fulfil our plans and meet the timetable for introduction. On Second Reading, I made it clear that the Government were aiming for the next Session.
Hon. Members cannot have it both ways. They cannot call on the Government to consult properly, to consider the options, and not to take Parliament for granted or make assumptions about what may follow, and then propose amendments Nos. 2 and 10, which would do exactly that.
The hon. Member for Gordon (Mr. Bruce) asked a number of questions and argued the points made by his hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) on Second Reading. In answer to his first question, the purpose of the Bill is to give the Government authority to undertake the development and consultation that every hon. Member who has spoken in the debate so far has recognised is necessary. It would be a miracle if we could settle on only one option and develop it. We need to explore the options. That is what consultation is about. Therefore, amendment No. 10, which introduces restrictions, is unhelpful.
The hon. Gentleman then pointed out how much this would cost. I draw his attention to the financial effects of the Bill and remind him that, inevitably, these are estimates. We have provided the Committee with the best estimate. Conservative Members repeatedly seem to forget that the Bill does not affect the controls on public expenditure and the need for the Department to be financially accountable to the Public Accounts Committee, the National Audit Office and its accounting officer. There is no question of a lack of accountability.
I do not think that the hon. Member for Gordon is suggesting that the Government should delay the introduction of the working families tax credit in opposing this paving Bill. Nor are other Opposition Members. They would not stand a cat in hell's chance on the doorstep of families who want to receive child care credits and understand how much the working families tax credit will help them to tackle poverty and support them in work if they explained, "We denied you all this money because we thought we should take a year longer."
The Government's request is reasonable. We want a paving Bill so that we can undertake consultation and development work. That will ensure that when we


introduce the legislation we have the tax credits ready and the House is fully informed. I ask hon. Members to reject amendment Nos. 2 and 10 because the controls they seek are unnecessary. The Government's undertakings are clear. Hon. Gentlemen should support the Government and ensure that the legislation is consulted on, well drafted and introduced on time.
I have one further point to make. It has been drawn to my attention that it was remiss of me not to wish the hon. Member for Sevenoaks (Mr. Fallon) a happy birthday. I do so now. In the good spirit in which I know he will celebrate his birthday, I am sure he will support the Government on Third Reading.

Mr. Quentin Davies: The Financial Secretary has great charm and I am sure that my hon. Friend the Member for Sevenoaks (Mr. Fallon) is touched at having his birthday remembered in this fashion and, indeed, recorded by Hansard for the world to know about tomorrow morning.
Once again, the hon. Lady has not dealt properly with the thrust of these important amendments. Their importance was well brought out by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth), my hon. Friend the Member for Ashford (Mr. Green) and the hon. Member for Gordon (Mr. Bruce). Both my right hon. Friend and the hon. Member for Gordon used the same phrase—a blank cheque. That is what the Bill is all about, and the House of Commons should not tolerate a blank cheque. A blank cheque will be forced on the Committee if we are not careful tonight.
My right hon. and hon. Friends deserve a considered response to the point they raised in relation to amendment No. 10. They asked why the Bill should be confirmed as a paving Bill only if the substantive Bill is read a Second time. The implication was: why did we not include in the amendment a reference to Third Reading or Royal Assent? Once again, my right hon. Friend demonstrates that he thinks that it would be appropriate for the Opposition to take a hard-nosed stance and to show no trust in the new Labour Government. Perhaps he feels that we have been excessively conciliatory in our dealings with them.
The essential point is that we are concerned with the extraordinary pretentiousness of clause 1(2)(a) which states that the powers
shall be exercisable whether or not Parliament has given any approval on which any of the things there mentioned depends".
We thought that at the very least we should make it clear that if the substantive Bill is not introduced or fails on Second Reading, and Parliament clearly has no general intention to proceed along this line, the paving Bill and the powers that it confers on the Government would be brought to an end. That is the least that we can expect from the Government. It is perfectly reasonable of my right hon. Friend to think that we might go for rather more, but I am sure he agrees that we should expect at least that.
I must ask the Financial Secretary what will happen if she introduces the substantive Bill, as she has undertaken to do—it is interesting that we have already have a commitment for the Queen's Speech this autumn—but it fails to receive a Second Reading. What will happen if the House decides not to proceed in the direction set out by the Chancellor of the Exchequer in his Budget speech? What will happen to the powers in the paving Bill?

We must have an answer to that before we take matters any further tonight. While that key question is in the hon. Lady's mind and before she can avoid it, I shall sit down and listen with interest to her answer.

Dawn Primarolo: I have explained why a paving Bill is required and why we need these powers for the two Departments to undertake the consultation and development work. It is the Government's clear intention to introduce legislation within the timetable. Given the hon. Gentleman's keen interest in that timetable, I am sure that he will do everything possible to ensure the legislation's speedy passage through the House.

Mr. Fallon: I assure the Financial Secretary that we have ensured that the legislation will go through the House reasonably smoothly. Indeed, we have been co-operating to that effect by agreeing to take all the remaining stages tonight, but she cannot expect this legislation to pass without any scrutiny whatever.
The hon. Lady provided only two justifications for the absence of any connection between this Bill and the legislation which will follow. First, she said that there was a public commitment to produce this legislation. I remind her that the Government made a public commitment to produce a Green Book at the time of the Budget, but that did not appear. They made a public commitment to produce a White Paper on union recognition last autumn and to produce a defence review by this spring, but those documents have not yet appeared. It is no use her simply saying that the Government are committed to doing this. We believe that our amendment would secure the necessary link.
Secondly, the hon. Lady suggested that whatever money was spent, there was some accountability. It was the Labour party which hammered the last Conservative Government about the sum spent in preparation for the community charge. All that money was similarly accountable for to Parliament. It was spent, and she, perhaps rightly, criticised how much was spent. Therefore, that suggestion will not wash.
The hon. Lady has not answered the concern we raised in amendment No. 2 or explained why this curious paragraph is necessary. She has not justified lines 17 and 18 which every hon. Member who has spoken in the debate finds puzzling. In effect, they provide that whether or not Parliament approves the ultimate transfer of benefits into credits, she can go on and spend the money. Those lines should have been justified, and amendment No. 2 would delete them from the Bill.
Amendment No. 10 did not win the unanimous support of the Committee. I take a more moderate view than my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) and my hon. Friend the Member for Ashford (Mr. Green). They are hard men, and perhaps they wanted me to press for the subsequent legislation to receive Third Reading and Royal Assent before the money could be spent. I was endeavouring to be helpful. We want the preparations to go well, but we also want to ensure that there is a longstop at the end. Specifying a Second Reading would at least have shown the Government's intention. Yet again, the Financial Secretary has failed to justify these wide-ranging powers,


but, because of the hour, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.

Sir Peter Emery: On a point of order, Sir Alan.

The Chairman of Ways and Means (Sir Man Haselhurst): I am given to understand that the right hon. Gentleman's point of order relates to another matter. It might be for the convenience of the Committee if we complete the business before us.

Sir Peter Emery: Further to that point of order, Sir Alan. The matter is urgent.

The Chairman: Order. The Bill has to be reported first.
Bill reported, without amendment.

Orders of the Day — Points of Order

Sir Peter Emery: On a point of order, Mr. Deputy Speaker. I shall get it right this time. I raise what I consider to be a most serious matter affecting a Select Committee of the House and the House as a whole. I ask that you report my remarks to Madam Speaker and ask whether she will look into the matter.
A Committee's papers are very much held by it and are not published until it decides that they should be. Today, a letter to the Chairman of the Select Committee on Foreign Affairs was referred to on the Floor of the House, not only before the Committee had knowledge of it, but before the Chairman had received it or even knew about it. That most unusual situation was made more unusual by the fact that a copy was in the hands of the BBC at No. 4 Millbank. In addition, one learned at the BBC that a communication made by the Minister of State about the matter, of which no member of the Committee and no hon. Member knew anything, had also been sent to the BBC.
This is a serious matter, because it affects the reputation of a Minister of State and evidence that was given to the Select Committee on Foreign Affairs this morning, which is partially but not entirely contradicted by the letter of Sir John Kerr. Will you, Mr. Deputy Speaker, please ask Madam Speaker whether she will look into the matter? The way to clarify the situation, as has been suggested, is to produce the briefing given by the Foreign Office to the Minister in question.
I realise that this is partially a Committee matter, but it is serious: it affects the House because the breach took place on the Floor of the House. Madam Speaker should look into it.

Sir Patrick Cormack: Further to that point of order, Mr. Deputy Speaker. In answer to me at business questions, the Leader of the House referred to the letter in a manner that implied that I might have seen it. She said that she did not know whether I had seen it. I would not for a minute accuse the Leader of the House of saying or doing anything improper, but I could not have seen the letter, unless I was a BBC employee perhaps.
This is most unfortunate, and I should be most grateful if you, Mr. Deputy Speaker, reported the circumstances to Madam Speaker and asked her to consider the tone and content of the letter. It refers to Sir John Kerr checking his memory. One would have hoped that he would have done that before appearing.

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The hon. Gentleman is straying far from anything that is the responsibility of Madam Speaker.
I shall reply to the point of order from the right hon. Member for East Devon (Sir P. Emery), who, in essence, supplied the answer to the point of order made by the hon. Member for South Staffordshire (Sir P. Cormack), although I allowed the hon. Gentleman fully to state it for the record. The communication was to the Chairman of the Select Committee on Foreign Affairs, so it is for the Chairman and the Select Committee to determine what should happen to the document. Any other reference to that is not a matter for the Chair; a reference by any other


right hon. Member or hon. Member is a matter for debate and question in the House. If I opine correctly about the subject matter, there is to be a debate on it on Monday.

Sir Peter Emery: Further to my point of order, Mr. Deputy Speaker. Of course you were right about the powers of the Committee—no one would challenge that—but my point is that the Committee has not had the opportunity to make any decision.

Mr. Deputy Speaker: Order. The right hon. Gentleman, who is a member of the Select Committee on Foreign Affairs, must know, with proper regard to its rights, that he must next raise the matter in that forum. It cannot be for me to deal with from the Chair.

Mr. Eric Forth: Further to that point of order, Mr. Deputy Speaker. The point that came up this afternoon was different: the Leader of the House was purporting to offer in evidence a letter, without giving the House the opportunity to see it.

Mr. Deputy Speaker: Order. I have dealt with that point. Anything that is raised by a right hon. or hon. Member is a matter for debate and question in the House, not a point of order for the Chair.

Sir Patrick Cormack: I am extremely grateful for what you have said, Mr. Deputy Speaker, but I merely ask whether you would be kind enough to refer the exchanges to Madam Speaker.

Mr. Deputy Speaker: I have ruled that both the points that I have identified are not matters for the Chair and therefore, by definition, not matters for Madam Speaker. They are, however, on the record for everyone to read.

Orders of the Day — Tax Credits (Initial Expenditure) Bill

Order for Third Reading read.

Dawn Primarolo: I beg to move, That the Bill be now read the Third time.
When the working families tax credit is up and running, it will provide £5 billion to 1.5 million working families, which is the equivalent of £70 per week per family, and will give almost £1.5 billion more in-work support than family credit. It represents an important step towards greater integration of the tax and benefits systems and will reduce the wasteful overlap between the tax and social security systems, whereby almost 500,000 families pay tax to the Inland Revenue while receiving family credit from the Department of Social Security.
This paving Bill will assist in the preparatory work for the development of the working families tax credit and the disabled persons tax credit. It will ensure that the legislation, when it comes before the House, has been fully developed and that the credits are ready to be put into operation.

Mr. Fallon: The Bill is not about working families tax credit. We look forward to making a range of arguments when the major legislation is presented to the House later in the year. So that no one is able to mislead the House or the country about our position, I shall put on record the fact that we are not opposed in principle to the translation of benefits into tax credits provided that the system is transparent, easy to operate, does not impose a significant additional burden on employers and is fully compatible with the principles of independent taxation that we introduced.
The Bill is unsatisfactory. It is indiscriminate, it lacks any limit on the expenditure being sought, it lacks a timetable and, above all, it is not a paving Bill, because it does not pave the way for any other legislation. Nothing in the Bill links it to any subsequent legislation. The expenditure under the Bill need not be restricted to the working families tax credit and the disabled persons tax credit. The definition in clause 1(1) is
benefits with income tax credits".
The Bill is thoroughly unsatisfactory, and we have done our best to amend it. The Financial Secretary has treated these proceedings throughout as if they were a burden to her. It is as if we should have given authority for this additional expenditure on the nod. The valid points that we have raised have justified the additional scrutiny that we have been able to afford the Bill.

Mr. Malcolm Bruce: As a Liberal Democrat, my support for the principle of tax credits is long-standing. My party has often argued that it is a way of transferring money to poorer people. I have no problem with the principle behind the Bill and the Government's desire to develop the idea of tax credits. I accept that we need to provide resources to do that.
However, my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) and I have expressed some reservations. We think that the Bill is imprecise and


ill defined. We shall hold the Government to the broad parameters that they have set themselves and to the timetable. I hope that as they develop the idea of tax credits, they will bear in mind the need for transparency and comparability.
The amendment to the Red Book was not an unreasonable way to present the figures. However, the problem is that it had a different effect. The Chancellor said that there should be a debate about whether tax credits should be classified as expenditure—in effect, a charge on social security—or as a negative tax incorporated in the Inland Revenue. The Bill requires the Inland Revenue and the Department of Social Security to work out ways of administering the credits. The effect of treating something as expenditure as opposed to negative income tax is that it alters the percentage of the gross domestic product that goes in taxation. That has the convenient effect for the Government of just taking it away from the top limit that it was about to reach.
I do not want to delay the passage of the Bill. I accept the Government's case with reservations. I urge them to ensure that when they present changes they do so openly and honestly, so that people can assess their significance. There is still concern about the problem of ensuring that the advantage gained from people getting benefits in connection with work does not undermine the principle, which the Government and the Liberal Democrats support, of the right of independent assessment. The Government have argued that, as that does not apply to family credit, no further compromise is required. However, they know perfectly well that an awful lot of women who currently receive money in their hands will not do so in future. If that were to happen, not everything that comes out of this process will be popular with all the beneficiaries. I hope that in a year from now the concerns that we have expressed will not have been vindicated by the outcome.

Mr. Forth: I am not as charitable about the Bill as my hon. Friend the Member for Sevenoaks (Mr. Fallon). We have not discussed its grand aims and objectives. The Financial Secretary misread the tenor of the debate when she happily burbled on about the joys to come if the Bill were to reach the statute book—never mind any further legislation containing the real substance, this being only a paving measure, as we have repeatedly been told.
The debate in Committee was about the essential nature of the Bill and our worries about it, charged as we are with scrutiny of legislation. The debate revolved around the key phrases in the Bill, which were picked up again and again. It allows the Secretary of State and the commissioners to do
anything which in … their opinion is appropriate for the purpose".
It rubs salt in that wound by saying that the powers conferred by that subsection
shall be exercisable whether or not Parliament has given any approval on which any of the things there mentioned depends".
Those phrases caused the greatest anxiety among Opposition Members. What makes matters worse is the provision in clause 1(3), which states:
Any expenditure incurred under this section shall be defrayed out of money provided by Parliament.

That is almost legislative impudence. It completes the vicious circle. The Bill is saying, "Trust us, allow us to spend anything. We're not going to tell you in any detail what we're going to do. By the way, we want Parliament to give authorisation for any expenditure that may occur but it won't be specified."

Mr. Green: Is not the position worse than that? As I read the Bill, it is possible for Parliament to reject the Bill that is intended to follow the paving Bill, and for this Bill still to enable the Government to act as if the subsequent Bill had been passed.

Mr. Forth: My hon. Friend is right. That is our dilemma. We are being asked to authorise this completely unconstrained, unidentified and non-detailed activity and expenditure without knowing what will follow and in the knowledge that, if nothing were to follow—which would be in tune with what we have come to expect from the Government—because of delays, internal disputes, indecision or further review, we would be left with the burdens that this Bill would impose on the taxpayer. We do not know what those burdens will be, except for the vague passing reference in the explanatory and financial memorandum to "around £15–20 million", although even that must be in some doubt.
When my hon. Friend the Member for Sevenoaks, perfectly reasonably, moved an amendment to write into the Bill a ceiling on expenditure not unadjacent to the figure in the explanatory and financial memorandum, the Financial Secretary refused to accept it.
The Financial Secretary sought to reassure us by saying, "Don't worry. As usual, the Public Accounts Committee, the National Audit Office, the accounting officer and other splendid organs of government and the constitution will scrutinise the money that has been spent, so that will be all right." By then, however, the money will have been spent. Surely our role is to take responsibility for the money before it is spent on the taxpayer's behalf. We should not turn round afterwards and say, "We are terribly sorry, but the PAC, the NAO and whoever else have just discovered that £20 million was spent to no effect." We have not had sufficient reassurance from the Financial Secretary.
This has been a rather sorry episode. My hon. Friends the Members for Sevenoaks and for Grantham and Stamford (Mr. Davies) have endeavoured to co-operate with the Government; they have been rather too helpful in my view, but I understand what they have done, because they share the broad objectives outlined by the Financial Secretary. I, however, am not satisfied. Whether any of my hon. Friends are dissatisfied is for them to say, but we need much more explanation from the Government—particularly the Financial Secretary—before we can be satisfied with the Bill.

Mr. Peter Bottomley: Let me briefly follow the point made by the hon. Member for Gordon (Mr. Bruce) about public accounting. The Bill's provision for effectively changing benefits into tax credits should also, in my view, be considered in regard to what is wrongly called child benefit. I have said before that it should be called a child tax allowance, and I believe that the commissioners of the Inland Revenue and the


Department of Social Security should consider whether it should be set against tax in public accounting. If so, it would have an impact on the public sector borrowing requirement, but would not be counted in public spending.
I would make more points if it were convenient to speak at greater length, but I must ask the Minister whether she knows the impact on public spending of turning one benefit and one allowance into a tax credit, and whether she could do the same for the child cash allowance. I feel strongly that child benefit should continue to be paid as a child cash allowance, but the name should change, for reasons that are perfectly well known to the Inland Revenue, the Treasury and the Department of Social Security.
Until we are willing to overcome the theology of Government book-keeping, and become as creative as the Bill, we will not help people at the time when they are responsible for children. I am not talking about those on income support, but those in the broad bands who, when they have children, have reduced taxable capacity and increased need. An allowance—preferably cash—is clearly appropriate, but should not be counted as public expenditure.

Mr. Quentin Davies: This debate, on an important Bill, has been much too short. Once again, that is extremely revealing of the fundamental arrogance with which the new Labour Government treat Parliament. We have had examples of that over and over again; I need not list them, as they are fresh in the minds of hon. Members on both sides of the House.
The debate has been a monumental example of a Government's taking Parliament entirely for granted. My right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) made an extremely powerful speech about precisely that. The Government may think that they can get away with it, and that they can win vote after vote with their enormous majority. That may make them even more self-confident and arrogant, but such pride comes before a fall. The British public will begin to notice that our institutions are subject to extremely frivolous treatment.
The Bill is extraordinary. My right hon. Friend the Member for Bromley and Chislehurst rightly said that it should go into the textbooks as an example of how Parliament is taken for granted. The Bill says that whether or not Parliament subsequently expresses approval, the powers, once accorded to the Government, will remain. In the debate on the last amendment, I asked the Financial Secretary what would happen if the House refused the Bill a Third Reading. Apparently, the powers—and the rights that they confer to spend taxpayers' money—will simply continue. The Government have not answered that question, or told us what they would do in those circumstances. That is simply not good enough.
We have said many times that we are not opposed in principle to the idea of working families tax credit. We therefore will not divide the House, and I do not urge my colleagues to vote against the principle of the paving Bill, because that would be interpreted as a desire to stymie the whole process. We do not want to do that, but we must ensure that if we go down this road, we do it properly. We must plan properly, but the Government have not satisfied us on that. They have rejected the sensible and

businesslike approaches in our amendments. We proposed that there should be a proper cash limit, a proper budget, proper controls and a proper time limit. They turned those amendments down, and there is a limit to our patience and indulgence.
We shall keep the matter under review. At least three major shortcomings in the Government's planning for the whole exercise were revealed on Second Reading, and have been revealed again today. Over the next few months, the Government must focus on those, and come up with clear answers. Up to now, we have had no answers on crucial issues.
Let me help the Government by reminding them what the key questions are on which they must do some homework over the next few months, and on which the British public will expect an answer before we consider how to vote in the autumn on Second Reading of the substantive Bill that will follow this. The first question has been put to the Financial Secretary repeatedly, but we have had no answer. What happens in the event of a dispute between partners over the working families tax credit? If the partners cannot agree whether the credit will be received by the partner in work through the tax system—

Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman, but this is a Third Reading debate. It should look back at the terms of the Bill, not look forward to what will happen in future.

Mr. Davies: It is indeed a Third Reading debate, Mr. Deputy Speaker, and we are, indeed, looking back. I am trying to draw conclusions from our debates, which will be extremely important to the substantive Bill to which this paving Bill looks forward. The Bill forces the British taxpayer to spend a lot of money in anticipation of the substantive Bill. It seems reasonable to make it clear that if the taxpayer's money will be spent on preparing for another Bill, the lessons of our discussion should be properly taken on board by the Government. When they next address the House on this subject, they may be a little better prepared than they were on this occasion.
There is another matter on which the Government had better do some rapid homework. There is considerable and growing anxiety about the burden of compliance costs on employers. The administration of the working families tax credit will be borne by employers. I put specific questions on that to the Financial Secretary, who, with her usual charm and parliamentary skill, deflected them all. We have had no answers.
What about the cash flow issue, to which I have already drawn attention? In many cases, under the tax credit, net pay will be greater than gross pay, and employers will pay more to their employees than they have contracted to pay. No doubt they will receive some compensation weeks or—who knows?—months later from the Benefits Agency, but who will pay for that? There has been no answer. It is not good enough for the hon. Lady to use the analogy of statutory sick pay and maternity pay. In most cases, employers do not pay the current pay that they are contracted to pay to employees in that position, but pay the maternity pay and the statutory sick pay instead. There is no cash flow loss in such cases; we want to know what happens when cash flow loss occurs.
The third general point—to which my hon. Friend the Member for Worthing, West (Mr. Bottomley) referred in his interesting speech—is the way in which this form of expenditure will be classified. Among the promises that the Labour party made to the electorate before the last election—many of which have already been broken—was a promise to reduce social security expenditure as a proportion of gross domestic product. If the Government are going to make progress towards that objective, it must be real progress. It must not be done simply by cooking the books, by falsifying the figures, by reclassifying what is now social security expenditure—the family credit—as something that is regarded as a tax credit, which is, in other words, negative tax and not public expenditure. That will not wash. If the Financial Secretary thinks that she can bamboozle the Opposition, or, indeed the British public, she had better think again.
I draw from today's interesting debates several lessons, in an attempt—my right hon. Friend the Member for Bromley and Chislehurst probably will not like this—to help the Government and to be positive. They may want to be taken seriously in bringing forward a new working families tax credit, but, next time around, in the autumn, we will not be so forgiving. We will expect clear precise answers to these important questions. We will expect the Government to do their homework—they have not done so up to now—and come to Parliament with proper modesty in proposing and explaining their legislative proposals, not the arrogance that we have had from them, with the Government thinking that, because of their enormous majority, they can simply take Parliament and its procedures for granted.
Question put and agreed to.
Bill accordingly read the Third time, and passed.

Orders of the Day — River Kennet, Wiltshire

Motion made, and Question proposed, That this House do now adjourn.—[Ms Bridget Prentice.]

7 pm

Mr. Michael Ancram: I should start by saying how grateful I am to Madam Speaker for the chance to raise this serious matter on the Adjournment.
In environmental terms, the River Kennet is one of the jewels in my constituency. It is not only one of the finest trout streams in England; the stretch of river to which this debate refers is a top-quality chalk stream and a site of special scientific interest in an area of outstanding natural beauty. Rising by Avebury with its ancient and awe-inspiring standing stones, it flows along a broad green valley, through the royal borough of Marlborough, by the Roman relics at Mildenhall and the riverside gardens at Ramsbury and past Chilton Foliat into Berkshire, where it finally escapes my representation. Just before Ramsbury, it runs by Axford, where much of the cause of this debate arises.
The Kennet is a special river not only to the angler, but to the conservationist, the environmentalist and, above all, the genuine countryman. It is not a large river, which makes it vulnerable. It is not a fast river, which makes it precarious. It is the epitome of a crystal-clear chalk stream, bringing quality of life to the community through which it passes, habitat for local flora and fauna, and great pleasure to all the people who live near or along its banks.
The River Kennet is under threat—from a changing climate, which has, as we all know, recently produced episodes of drought, from man-made activity along its banks, but, above all, from the abstraction of its precious water to feed developments outwith its catchment area, which are mostly in and around Swindon, to its north.
I have watched the River Kennet at close quarters for some eight years. I have read all the technical data about the river and have tried, along even with experts, fully to interpret those data. It is not easy, especially for the layman. I hear the arguments about levels of flow and their effect on the ecology of the river. I struggle with cost-benefit analyses. My plea tonight, however, is based as much on my instinct as a simple countryman as on any of those matters. To a simple countryman, the fact is that the River Kennet is declining and the main cause for that decline is the amount of water that is abstracted from it both at Axford and further up the river.
It is deeply depressing to see that the River Kennet to the west of Marlborough is, in the summer, effectively a dry and overgrown river bed, and to the east of Axford an unnaturally slow and reduced flow. It is an alarming spectacle when, each year, the extent of those problems appears to increase. It is not only of direct and understandable concern to people who fish or earn their living from fishing on the river; they have a direct and legitimate interest in being concerned. It is also a cause of anxiety to all the people who just value the countryside and the natural environment. However, that depression, that alarm, that concern, that anxiety are seemingly just brushed aside by those who have an interest in abstracting water from the Kennet, and it seems recently, I regret, by the Government as well.
Ironically, anyone who looks at the River Kennet today might wonder at this debate because, after a month of unusually high rainfall, the river is in what is known as


spanking condition. It is looking as it always should look. The sad truth is that this is the exception which proves the rule. Normally these days, a much diminished version is seen. The river's flow has been reduced and that cannot be denied.
Thames Water Utilities Ltd., which abstracts the water, blames river modifications for the changes in flow patterns and droughts for the reduction of flow. I find that a somewhat specious argument as, in the absence or with a reduction of abstraction, those other circumstances would themselves be less significant.
Blaming drought in particular begs the question. If the risk of flooding on a flood plain is measured on a ratio of 100 years as a relevant criterion in considering planning applications for housing, surely the risk of drought measured on a similar ratio and for similar reasons in applications for water abstraction licences should equally apply. That is to say that, unless it is shown to be likely, rather than the exception, it should not be relevant. The real point is rather simpler: without drought, abstraction still reduces the river flow by the amount abstracted and the damage of that reduction still occurs. With drought, that problem is merely compounded.
None of us argues that no water should be abstracted, only that it should be contained within the limits that the river can, without lasting damage, afford. People need water, but so does the environment. It must be a matter of proper balance. It is the lack of that balance that gives rise to such anxiety.
The subject has long been a matter of local concern. I pay tribute to the group Action for the River Kennet, which is known locally and affectionately as ARK, for the way in which it has informed and guided local opinion and ensured that it has been directed constructively. The extent of that local concern has been demonstrated over a long period by substantial attendances at local meetings—not least one three weeks ago. My constituents mind about the Kennet. I mind about the Kennet. We are looking to the Government to mind, too.
Although this concern arises as much in relation to the reduction of water in the aquifers at the head of the river, which is the apparent cause of the river's virtual disappearance to the west of Marlborough in the summer—a matter that also needs to be addressed by the Minister—the most recent concern has been brought to a head by the Government's decision in February in relation to the River Kennet, consequent upon a public inquiry in 1996 into Thames Water's abstraction at Axford.
The inquiry was precipitated by Thames Water's application to make permanent a temporary variation to its abstraction licence, which had been in force for 15 years and which allowed the company to exceed its base licence of 13.1 megalitres per day by a further 7.4 megalitres per day, subject to a minimum flow of 61.4 megalitres per day measured at a particular point. The Environment Agency had sought a progressive minimum flow increase and, most important, a reduction in the base volume. Thames Water appealed against that.
The inquiry was highly technical, hearing evidence on hydrological models of the effect of abstraction on river flow and, consequently, on aquatic flora and fauna. The case against Thames Water, which was led by the Environment Agency, was in summary that low flows were making the river less suitable for water crowfoot and

brown trout, two species that are particular indicators of a healthy chalk stream. The argument was that the river was being damaged.
In the event, the inspector recommended against the Environment Agency's proposal for a reduction in the base rate of abstraction and suggested a review of that in 2007. He accepted a first-stage cut-off of 69 megalitres per day, but extended that to 1999. He reduced the agency's proposed second-stage cut-off from 104 megalitres per day to 90 megalitres per day.
In February, the Secretary of State upheld Thames Water's appeal and endorsed the inspector's findings with no further comment. Although that was an improvement for the river on the current position, the result was deeply disappointing considering the circumstantial evidence in support of the Environment Agency's position. However, the lack of explanation of the Government's decision caused the greatest concern; hence today's debate.
People regard the Environment Agency as not only the Government's adviser in matters environmental, but their protective arm. When the Government appear to cast aside that protective arm, that is obviously a matter for consternation and requires, at the very least, substantial explanation. After all, to whom else can people look for environmental support and protection?
That consternation has been further compounded by the apparent conflict of the Government's decision with the Secretary of State's statement at last May's water summit that the forthcoming review into water abstraction
would examine ways in which environmentally damaging abstractions … can be equitably curtailed".
The decision also seems to be at variance with the parliamentary answer from the Minister for the Environment on 25 March 1998, which said:
Where water abstractions are damaging sites specially protected—
by, among other things—
designation as SSSIs"—
as is the case here—
the Environment Agency should seek voluntary agreements for reductions with the abstractors where possible. Where that is not possible, the Environment Agency should use its existing powers … to vary or revoke the relevant licences, and be prepared to pay compensation where necessary. As part of their review of the water abstraction licensing system, the Government are considering future compensation arrangements and a consultation paper on those and other proposals will be published within the next few weeks."—[Official Report, 25 March 1998; Vol. 309, c. 163.]
That has certainly not been the outcome of the Government's decision in this case; far from it. I have not read the consultation paper—I am not sure whether it has yet been issued.

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Angela Eagle): indicated assent.

Mr. Ancram: The Minister nods—it has been issued. More importantly, the lack of explanation as to why the decision runs so counter to the statements that I have quoted is a genuine cause of resentment and concern. I hope that we will receive some explanation tonight.
First, I hope that we can agree that there is damage to the River Kennet from abstraction. There may be arguments about the extent and effect of such damage, but


the acceptance of its existence is an important starting point. At the inquiry, it was generally agreed that the river's flow had been reduced by the Axford abstraction and that over time the diminution in the flow roughly equals the abstraction.
It was also generally accepted that ranunculus growth had declined noticeably around Axford, which also corresponded roughly with the increased abstraction from that point, and that ranunculus growth is a good indicator of a river's health. I therefore hope that we can all accept that there is some damage, and hence some danger, related to abstraction. That falls fairly and squarely within the parliamentary answer to which I have already referred.
Why, then, in their decision, have the Government seemingly ignored that damage in agreeing with the inspector to leave the base rate of abstraction unchanged? Could it be that there was a desire to avoid the question of compensation arising, especially as the formulation of compensation, and where it would come from, has yet formally to be articulated? Did the inspector deliberately avoid the issue of compensation because there was a lack of direction, and if so, should not the Government have re-examined that aspect of the report and, if necessary, made changes to the recommendations in the light of that?
If decisions have not yet been made about the thorny problem of compensation, would it not have been better to hold off the decision—which, after all, had been waiting, without explanation, for over a year—until any new criteria or arrangements could be applied?
Why did the report and, by their endorsement, the Government cast aside the cost-benefit analysis of their own Environment Agency in favour of Thames Water's figures? The decision to reject the agency's basis of calculation created an adverse difference of £12.9 million—between the agency's figure of £13.6 million and Thames Water's figure of £0.7 million—so there can be no doubt that that was a significant deciding factor.
The agency had followed the benefits manual guidance in making its calculation, using the number of people in Thames Water's supply area. The inspector rejected that in favour of using a much smaller local head count. The agency believes that that decision has blown a hole in the wider strategy that it is pursuing on behalf of the Government and will seriously hamper its work on other rivers and wetlands.
We are not talking about a peripheral judgment on methodology. The decision on the cost-benefit analysis strikes at the heart of the environmental argument. It illustrates an enormous variation in the methodology used to calculate what is known as the non-use value, which might more accurately be called the environmental value. By endorsing the lowest basis for calculating the environmental value for the Kennet, the Government are in danger of undermining the importance of the environment in such disputes.
I hope that the Minister will explain why the endorsement was given and whether it reflects the Government's view of how environmental value should be assessed. If it does, we shall have to revise our perception of the Government's environmental policies; if it does not, the validity of the Government's judgment on the Kennet will be seriously called into question.

The Government cannot have it both ways. I suspect that no one is more aware of that than the Environment Agency. I hope that the Minister will clarify the Government's position on that important issue.
More generally, is the forthcoming review likely to produce findings that, had they been effective, would have led to a different conclusion on the Kennet? If there is any chance of that, would it not have been fairer and more sensible to have held the Kennet decision until the review was complete? If that proves to be the case, will the issues be reviewable before 2007—the date proposed in the report endorsed by the Government? Anything less than that would lead to great resentment in my constituency. I hope that the Minister will consider my request seriously.
I fear—I am always a pessimist on such occasions—that the Minister will tell the House that nothing can be done until 2007. The river will not survive that long without further deterioration. We need reassurances now. In spite of my fear, I live in hope that they might be forthcoming, if not tonight, then in the near future, when the full implications of the Government's decision on the Kennet, and more widely, have had time to sink in.
The Kennet won a little respite from the outcome of the report, but not as much as had been hoped. If abstraction continues, even at the newly proposed rates, the river will remain in danger. Environmental damage to rivers such as the Kennet is easy to cause, but more difficult—sometimes impossible—to repair.
I read the inspector's report, which the Government endorsed, with a heavy heart. I appreciate that such reports and decisions must be informed by models, methodologies and statistics, but I cannot help feeling that the real criteria are to be found in what the eye can see and what those who live by rivers such as the Kennet feel and experience. Rivers are more than a set of statistics and scientific findings; they are as much a part of our environment as the air that we breathe and the ground on which we walk. We know instinctively when our environment is under threat. In my part of Wiltshire, we know that the Kennet is under threat. We can see that, and physically experience it, as the river dries and the flow reduces.
The Kennet is much more than just a stretch of water, a source of fishing or a pretty sight. It is part of the lives of my constituents; part of the environment in which we live and work; part of the quality of life in my constituency. That is why we fight to defend it. That is why we resent the current levels of abstraction and the half-hearted response to the danger in the inspector's report. That is why we find the report and the Government's acceptance of it, without explanation, so unpalatable. That is why I am seeking explanations and hoping for reassurances. The Kennet needs help. We are looking to the Government to provide it. I hope that the Minister will not disappoint us.

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Angela Eagle): I congratulate the right hon. Member for Devizes (Mr. Ancram) on successfully securing this debate.
I am aware that there have been concerns about the River Kennet for several years. Indeed, they stretch back to the term of office of the previous Government,


of which the right hon. Gentleman was a member, as well as into this Government. I am grateful for the intense interest in the issue that the right hon. Gentleman and his local community have taken, and for the work of various conservation groups, which not unnaturally guard the Kennet jealously. It is essential that environmental issues such as this are fully aired and that all those with an interest have an opportunity to contribute their views.
The Government are determined that the water industry should be world class, water efficient and environmentally sustainable. That was the message at our water summit just a year ago, which the right hon. Gentleman mentioned, at which my right hon. Friend the Deputy Prime Minister set out a 10-point plan of action to deal with leakage, and challenged water companies to increase efficiency measures so that our water resources were not squandered or put under undue strain, but used sensibly to meet people's needs. We also announced at that summit a review of abstraction licensing, as the right hon. Gentleman has pointed out. We shall announce the results of that review soon. If he wants a copy of the consultation paper, I should be happy to get one for him.
The public inquiry into Thames Water's Axford abstraction licence appeal lasted 22 days. The inspector heard not only from the principal protagonists, Thames Water and the Environment Agency, but from English Nature, the Wiltshire Wildlife Trust, Action for the River Kennet, the Kennet Valley Fishery Association and 15 interested persons. He also took into account written representations from 19 organisations and individuals, of whom the right hon. Gentleman was one.
In the course of his inquiry and his consideration, the inspector had the benefit of numerous written reports and proofs of evidence from the various parties. There can be no doubt that all concerned took a full opportunity to present their cases to him. His report runs to more than 140 pages, and is commendably thorough and clear in its approach. It makes it clear that the upper River Kennet is a valuable example of an English chalk stream, and its associated flora and fauna. Indeed, as the right hon. Gentleman pointed out, from Marlborough to Thatcham, it has been designated a site of special scientific interest.
Much of the concern among local people about flows stemmed from their observation of reduced water depths in the river, although the inspector pointed out that dredging and other work on the river channel and general silt removal may have had some effect on water levels. He also pointed to the effect of weirs and hatches, and of reduced weed growth on river water levels. He recognised that the Axford abstraction had had an effect, but on consideration of flow modelling and other technical information put before him, found that the Axford abstraction could affect the river water levels by only about 3 cm. Although a possible contributory factor, that is certainly not sufficient on its own to explain the changes that have occurred to the plant life and general ecology of the flood plain.
The inspector saw no reason to suppose that there was anything but a normal healthy macro-invertebrate population in the River Kennet, but he found, as the right hon. Gentleman at least hinted, a considerable decline in the growth of ranunculus—the common name for which is water crowfoot—in the entire upper Kennet between Marlborough and Knighton since the early 1980s. That decline seems to have been particularly marked in the Axford and Ramsbury area.
The presence of water crowfoot encourages fish and their food sources. In addition, a good growth of it considerably increases water depth simply by its mass and impedance to the flow of the river. For those reasons, the inspector accepted that the plant was an important indicator and controller of the health of a chalk stream such as the Kennet. He concluded that, in normal winter periods, there was no particular concern about the effect of the Axford abstraction on ranunculus, but he found that changes in river velocity, such as might occur in summer or in exceptional winter conditions, might explain the greater decline in the plant around Axford and Ramsbury.
River dredging deepens the river channel and contributes to reduced velocity. The inspector indicated that changes to such practices, or the carrying out of other in-stream engineering works, might help to maintain river velocity. Interested parties might care to consider that further. If the Environment Agency were to find any serious legal impediment to the maintenance of or alteration to such a course of action, it would no doubt draw that to Ministers' attention.
Water crowfoot could also be affected by increased siltation, increased growth of the blanket weed, cladophora, or by the growth of brown algae, but the inspector found that the Axford abstraction would have no significant effect on any of those processes. Even without the slight reduction in dilution caused by the abstraction, phosphorus concentrations in the river are considerably higher than would be required to limit the growth of blanket weed or algae.
Phosphorus concentrations are influenced by agricultural practices in the catchment and by the Marlborough sewage works discharge. I understand that Thames Water is working with the Environment Agency on a new project to investigate the impact that phosphorus reduction has on the river. That is a good example of co-operation, of which we would like to see more, in tackling environmental problems in rivers. It also exemplifies the holistic approach to river catchment management, which is essential if we are to do the best for the environment and its users. As a nation, we lead integrated catchment management. The proposed water framework directive, on which we are making great strides during our presidency of the European Union, is founded on that approach.
I am aware that the Kennet sustains a varied grouping of fish species. The inspector found that, apart from brown trout and, perhaps, grayling, there is little evidence to suggest that any of the populations of fish have suffered recently. No direct link was shown between the Axford abstraction and the declining size of the grayling population. Furthermore, the inspector considered there to be only limited evidence of a decline in the wild brown trout population in the river, and practically none to indicate that the situation was any worse in Axford and Ramsbury than anywhere else.
The inspector went on to consider the computer modelling work that featured in the inquiry. It rejoices in the acronym, PHABSIM—physical habitat simulation model. It was developed in the United States of America, and has been used in New Zealand and several European countries as well as the UK, where our Institute of Hydrology has concluded that it is a powerful technique. The inspector accepted that, if correctly applied, it could


help to inform decisions relating to the ecological impact of changes in river flows. The inspector also recognised the complex nature of the work.
Hon. Members will not expect me to launch into a detailed explanation of such work, but, as the inspector pointed out, it was unfortunate that the protagonists were not able to co-operate and reach agreement on how PHABSIM should have been applied in this case. That is clearly one of the lessons to be learned from this episode. I trust that all with an interest in the matter will join me in encouraging scientists to work together to improve the application of such techniques.
Nevertheless, in the light of his detailed consideration of what he was told by the protagonists, the inspector concluded that the PHABSIM work tended to support the view that ranunculus could suffer at flow rates in the order of those associated with the Axford abstraction. He therefore reached the conclusion that abstraction of the full 20.5 megalitres per day, which had been allowed under the previous time-limited variation to Thames Water's licence whenever the river flow at Knighton was above 61.4 megalitres per day, should in future be allowed only when the river flow was above 90 megalitres per day. That is a tightening of abstraction licence conditions.
Moreover, the inspector recommended that the new variation should last only for a further 10 years, rather than in perpetuity, as Thames Water had sought. That should be regarded as a victory. However, from consideration of all the environmental evidence, the inspector concluded that there was no requirement for a reduction in the abstraction rate below that of the base licence, which dates from 1965 and authorises abstraction of 13.1 megalitres per day.
The Secretary of State accepted those conclusions. As I have said, the inspector was presented with a wealth of information pertaining to the fundamental question. That is the purpose of any public local inquiry. After prolonged consideration, the inspector found that the environmental evidence did not fully support the proposed action, and the Secretary of State found no reason to disagree with that view.
Since our decision was announced and the inspector's report was put into the public domain, much has been made of his comments and conclusions on the costs and benefits associated with the reduction of the Axford abstraction to the extent proposed by the Environment Agency. I think that it proposed a level as low as 3 megalitres.
The letter conveying the Secretary of State's decision made no reference to those conclusions, as the decision was taken on the basis of the inspector's conclusions in respect of the environmental evidence. Despite the inspector's stated view that the approach adopted to the assessment of benefits was acceptable in principle, it was clear from his further comments that considerable and unresolved uncertainty and controversy existed over the detailed way in which the approach should be followed in that particular case. That was the lack of agreement that I mentioned earlier.
The approach adopted was that described in a manual published in 1996 as a result of collaborative research funded in part by the former National Rivers Authority and the then Department of the Environment, as well as

by a body representative of the water companies, so it is untrue to say that it was simply a creation of Thames Water. The executive summary to that manual made clear the limitations of the methodology, and envisaged that experience in its application would provide a basis for updating it in due course.
Moreover, no matter how well developed general methodologies for assessing environmental costs and benefits become—and it is evident that a considerable amount of development remains to be done—the complex and highly variable nature of individual river systems and of their significance to society will almost certainly make it essential for detailed and specific studies to be carried out in particular cases. I hope that that goes some way towards reassuring the right hon. Gentleman that in future hearings on abstraction licences, there will not suddenly be rule by computer models and manuals that do not apply to specific cases. Even as we speak, officials of my Department are discussing the matter with their counterparts in the Environment Agency.
The appeal also highlighted the fact that many abstraction licences have no time limit attached to them. They remain until revoked or varied and, as the right hon. Gentleman pointed out, if either of those things is done at the direction of the Secretary of State, the question of compensation arises. Compensation arrangements, in both the short and the longer term, and time limits for licences are among the many facets of the present licensing system that we are examining in our review. However, I must emphasise that it is the system that we are now reviewing, not individual licences.
My answer to a question that the right hon. Gentleman asked is that that decision was taken under the existing system, and does not prejudice any future system that we may put into effect after the review is published, should we decide to legislate. We shall publish a consultation paper on our proposals in the next few weeks. As I have already said in the House, where voluntary agreement cannot be reached on licence changes necessary to protect SSSIs, the Environment Agency should, on a prioritised basis, use its existing powers to see that the changes are made.
It is the environmental evidence that is and will remain all-important in carrying through contested changes to licences. There has to be a strong case—a case that, as I have said before in the House, will withstand the scrutiny of public inquiry—to show that a particular course of action is appropriate for correcting whatever environmental harm is being caused.
Clearly, the question of the Axford abstraction can be reopened at any time. I hope that that that gives the right hon. Gentleman the reassurance that he sought. There is certainly no requirement to wait until 2007, but the case for further action must be strong. It is clear that the causes of the perceived problems with the River Kennet are complex. Here, as elsewhere, there is a continuing need for all concerned to work together to understand the causes and to agree on whatever action needs to be taken. I am sure that the right hon. Gentleman will join me in encouraging all concerned about the Kennet to do that, to ensure its future as an important SSSI, as a beautiful feature of his constituency and as a river that many people enjoy.
Question put and agreed to.
Adjourned accordingly at twenty-seven minutes to Eight o'clock.